Plans by the nation's biggest banks to charge customers monthly fees for using debit cards are being dropped faster than a Kardashian husband. Bank of America announced Tuesday it is not going forward with its planned $5 per month charge for debit card users, and other banks are also abandoning the fees. Banks saw the fees as a way to recoup revenues after new government regulations slashed the debit card interchange fees paid by retailers. But consumers revolted with a loud public outcry and moved to take their business to credit unions and other fee-free banks. When people are given clear information about bank fees — instead of the banks' hidden "gotcha" fees — they can vote with their feet and force change.
The dominoes fell quickly. Last week, JPMorgan Chase and Wells Fargo announced they would cancel debit card fee testing programs. On Monday, SunTrust Bank and Regions Bank said they would end the fees and reimburse customers for any already collected. Bank of America relented a day later.
Americans have plenty of pent-up anger at the country's big banks. The irresponsibility and greed of many banks contributed to the financial crisis of 2008, yet the institutions were bailed out by taxpayers. And banks extracted exorbitant fees from their customers in surreptitious ways — such as imposing overdraft charges on small debit card purchases without telling customers that their account funds were exhausted.
When the government finally stood with financial consumers and put an end to some of these shenanigans — including the Federal Reserve effectively cutting in half the unjustified charges banks imposed on retailers each time a customer used a debit card — the banks searched for ways to make up the billions of dollars in lost revenue.
The announcement by many banks of a monthly fee on customers using debit cards was greeted with fierce anger and congressional saber-rattling. Some Democrats requested a Justice Department probe into possible collusion by banks over the fees, and disgusted customers switched to credit unions in droves.
Tampa-based Suncoast Schools Federal Credit Union, the biggest credit union in Florida, picked up more checking account customers the past month than in the entire second half of 2010. Other local credit unions experienced similar bursts of new business.
This is why transparency in banking is so essential. The new U.S. Consumer Financial Protection Bureau was established to be a watchdog over financial products sold to consumers, forcing banks to be more straightforward about the costs of their services. Armed with clear, easily understood information, consumers are being empowered to make educated financial choices. And in the case of debit card fees, that has forced the banks to submit to public opinion and cave.