Bank of America to Customers: Gotcha

Some call it arrogance, others call it a fair price for services. Whatever…the banking industry on Tuesday defended a controversial new fee on debit cards as some Democrats called on consumers to abandon financial institutions that impose the charge, the Washington Post writes.

Rep. Brad Miller (D-N.C.) introduced a bill that would make it easier for customers to close their accounts and prohibit banks from assessing fees for the process. Meanwhile, Sen. Richard J. Durbin (D-Ill.) sent a letter to community banks and credit unions in his home state urging them to “seize this competitive opportunity” to woo consumers away from larger institutions.

The debate centers on a $5 monthly fee that Bank of America plans to begin charging next year to customers with the most basic checking accounts who use their debit cards to shop. Though Bank of America is the first major bank to adopt the fee, Wells Fargo and Chase are testing the charge and some regional banks have already instituted it.

Earlier this week, President Obama criticized the move as a way for banks to pad their profits at the expense of consumers. The American Bankers Association, a trade group, fired back Tuesday, accusing Washington of attempting to control private-sector prices. Banks say the fees are the consequence of a new federal rule that took effect Saturday limiting the amount of money they can collect from merchants each time a shopper swipes a debit card. The regulation cuts the fee by roughly half, to 24 cents for an average $38 transaction, costing the banks an estimated $8 billion to $10 billion.

The new monthly charges have angered many customers, and Bank of America’s Web site has been intermittently down in recent days. A spokeswoman said the company is committed to “clear and transparent pricing,” and that the fee will help allow it to “continue providing secure and efficient methods of payment for our customers.” The controversy has weighed on Bank of America, which is grappling with bad loans and lawsuits stemming from shoddy mortgages. On Monday, the bank’s stock fell below $6 for the first time since the financial crisis in 2009. Shares again fell Tuesday, before rallying just before the close to end up by 4.2 percent to $5.76…

Read more at http://www.washingtonpost.com/business/economy/banks-defend-debit-card-fees-amid-pressure-from-washington/2011/10/04/gIQApU6rLL_story.html