Slideshow Durbin: BofA’s Debit Fee Drives Customers To Credit Cards

  • October 06 2011, 12:35pm EDT
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Consumer Outrage

Capitalizing on consumer outrage over a $5 monthly debit card fee Bank of America Corp. plans to impose, U.S. Sen. Dick Durbin, D-Ill., is urging smaller banks to seize the “competitive opportunity” and go after unhappy BofA customers while suggesting the issuer would prefer its customers use credit cards instead.

On The Attack

Durbin announced during an Oct. 4 press conference that BofA’s goal in imposing the new fee is “to make debit cards more expensive” for consumers because of a Federal Reserve Board rule that went into effect Oct. 1. The rule caps the debit-interchange rate for large banks at 21 cents per transaction plus a few cents to cover fraud and other costs. Previously, debit interchange for large banks averaged about 44 cents per transaction, he noted.

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By charging customers a fee for using debit cards, BofA hopes to steer more consumers to use credit cards for everyday transactions because credit card interchange rates, which are not regulated, are higher and generate more income, Durbin said. “So if they can push people away from debit cards into credit cards, where it’s unregulated interchange fees, they make more money,” Durbin said.

Enormous Profit

In a letter to BofA's CEO Brian Moynihan, Durbin said that if BofA’s estimated 38.7 million debit card customers each pay a $5 monthly debit fee, BofA would pocket $2.32 billion “on top of the enormous profit it will already receive under the Fed’s swipe-fee rates.”

Take A Walk

“Vote with your feet. ... Get the heck out of that bank. Find yourself a bank or credit union that won’t gouge you for $5 a month and still will give you a debit card that you can use every single day,” Durbin said.

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Competitve Opportunity

Durbin also sent a letter to Illinois-based banks and credit unions on Oct. 4 urging them to “seize this competitive opportunity” and step up to provide services for consumers looking to move their deposit accounts from the largest banks to smaller financial institutions.

More Legislation?

Asked by reporters at the Oct. 4 press conference whether he plans to initiate any legislation to cap credit card interchange rates, Durbin said he is “not ruling out anything at this point” but said there is no pending legislation on credit card interchange.