BOSTON (TheStreet) -- New government regulations, intended to be consumer-friendly, could end up taking the blame as banks raise costs for ATM use and checking accounts.
Among the items in the Dodd-Frank Wall Street Reform and Consumer Protection Act that passed into law this summer were limits on interchange fees, the charges banks and credit card companies such as MasterCard (Stock Quote: MA), Visa (Stock Quote: V) and American Express (Stock Quote: AXP) assess merchants every time a credit or debit card is swiped. The legislation's Durbin Amendment, named for Sen. Richard Durbin (D-Ill.), empowers the Federal Reserve to determine "reasonable" fee limits, setting the stage for a reduction to the 1% to 3% typically assessed for processing.
With debit card fees totaling roughly $20 billion a year industrywide, a reduction could be painful to banks' bottom lines. In a recent earnings report, Bank of America (Stock Quote: BAC) said these fees represent $2.9 billion of its annual revenue and could cut into that stream by as much as 80%.
Higher ATM fees may be among the moves on the horizon in response to this and other regulatory moves, such as new overdraft regulations.
"New regulations are cutting into their fees and the banks are planning on changing their pricing structure accordingly," says Gwenn Bezard, a research director with Boston-based Aite Group. "You have a lot of business plan review going on at banks as they try to figure out where and how to make money moving forward and where they are going to recoup their revenues. Banks are not going to sit idle and just see their profit margins diminish. The new regulations mean they have to come with new ways of making money."
Nationally, 85% of the 2,488 banks and credit unions surveyed by Moebs $ervices, a Chicago-based banking analyst, charge ATM fees, including 95.5% of "Wall Street banks" with $50 billion or more in assets, and 79.1% of smaller credit unions.