This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Bank of America Has It Right on Fees, So Back Off (Update 2)

The company in November settled a class action suit over maximizing overdrafts by processing the largest transactions first on a daily basis, by agreeing to pay $410 million to 13.2 million customers whose debit card overdraft fees had been maximized, when the bank processed larger transactions first.

The latest megahit on fee revenue was the Federal Reserve's clampdown on the interchange fees large banks charge merchants to process debit card purchases, as required by the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act.





The Durbin Rule reduced Bank of America's fourth-quarter revenue by $400 million.

Here's how the "opt-in" and Durbin rules affected the rest of the "big four" U.S. bank holding companies:

  • JPMorgan Chase's (JPM - Get Report) service charges during the fourth quarter of 2010 -- the first full quarter under the requirement that customers sign up for ATM and debit card overdraft protection in advance -- totaled $1.1 billion, declining 18% from a year earlier. The company said in its annual 10-K filing on Tuesday that "as a result of the Durbin Amendment, its annualized net income may be reduced by approximately $600 million per year."
  • For Wells Fargo (WFC - Get Report), fourth-quarter 2010 service charges on deposit accounts totaled $1.0 billion, declining 27% from a year earlier. The company said during the fourth quarter of 2011, it saw a "$365 million decline in debit interchange fees."
  • For Citigroup (C - Get Report), which has a much smaller U.S. deposit base than the other "big four" club members, fourth-quarter 2010 service charges on deposit accounts actually increased 1% year-over-year, to $158 million. The company said during the fourth quarter of 2011, main subsidiary Citicorp saw a slight year-over-year increase in retail banking revenue, to $4.1 billion.

The next attack on banks service charge revenue is likely just around the corner, with the new and very powerful Consumer Financial Protection Bureau announcing on Feb. 21 that it had "launched an inquiry into checking account overdraft programs to determine how these practices are impacting consumers," with Director Richard Cordray saying that "overdraft practices have the capacity to inflict serious economic harm on the people who can least afford it."

With the "opt-in" rule already in place, with the most peoples' ability to count, it would seem the CFPB might be overreaching here to protect people from themselves, but it doesn't matter. The bureau exists, and it has the power to hammer through more changes and more revenue reductions for banks.

The CFPB on Thursday announced that it "began accepting consumer complaints about bank accounts, including checking accounts, savings accounts, CDs, and related services."

Cordray said "deposit accounts play a critical role in the lives of most Americans, but these products and the laws governing them are complicated," adding that "consumers need someone on their side to keep banks and credit unions accountable."

The bureau said it expected "to respond to complaints within 15 days and seeks to close all complaints within 60 days," and expected to receive complaints about account opening, closing and management; deposits and withdrawals; ATM and debit card usage; payment transfers; and "problems related to low account funds."

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
WFC $54.36 0.00%
BAC $15.57 0.00%
C $53.20 0.00%
JPM $63.24 0.00%
YHOO $44.66 0.00%

Markets

DOW 18,034.93 +208.63 1.17%
S&P 500 2,100.40 +19.22 0.92%
NASDAQ 4,994.6020 +62.7870 1.27%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs