NEW YORK (MainStreet) -- Call it good will gone hunting.
After making the decision to start charging a $5 monthly fee beginning in 2012 to customers who use their debit cards for purchases, Bank of America (Stock Quote: BAC) now risks losing a big dose of good will among customers – and Washington may not be far behind.
The fee was announced last week in response to the controversial Durbin Amendment to the Dodd-Frank financial reform bill, which reduces the amount of money banks can charge merchants for debit card purchases from an estimated 44 cents per transaction to 21 cents.
The legislation indirectly adds up to a user fee increase for Bank of America customers, which was certainly not the outcome that Congress and the White House, which both signed off on the Durbin Amendment, were expecting.
Washington politicians are already facing some negative fallout from the Bank of America fee change, and some are on the defensive. Sen. Richard Durbin (D-Ill.) told consumers earlier this week that they should take their money elsewhere.
“Bank of America customers, vote with your feet, get the heck out of that bank,” Durbin said on the Senate floor on Monday. “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. What Bank of America has done is an outrage.”
But many consumers weren’t buying it. Most commenters who posted responses online to an ABC News story covering Durbin's statement appeared to be as outraged at Washington politicians as they were at Bank of America.
“Sorry Durbin but it is the legislation passed by Congress that led to these fees,” one commenter said. “Every time Congress steps in to help the consumer it ends up costing us.”
Of course, Bank of America has been experiencing its fair share of backlash from consumers in the past week as well.
“I think there is some danger of substantial loss of good will – reputational capital,” said Stuart I. Greenbaum, Ph.D, former dean and professor of managerial leadership at Washington University in St. Louis, in a statement released by the university. “Instead of charging the seller of goods the fee, which they presumably incorporate into the price of the goods, the fee is now levied directly on the user of the card.”
Greenbaum predicts that many Bank of America customers will leave for another financial institution.
It’s important to note, though, that other banks are estimated to lose plenty of dough on the new debit card interchange fee rules as well. While figures are all over the map, Moebs Services estimates that big banks – those with $10 billion or more in assets – will see debit card fee revenue fall from $18.8 billion in 2010 to about $14 billion in 2012.
“This should benefit competitors to the large banks that charge the debit card fee,” Greenbaum says. “The main competitors are small banks and credit unions. Credit unions typically operate at lower costs so the typical customer could walk into a credit union and find a debit card fee that’s lower than the one at Bank of America.”
We do know one thing for sure: Consumers are already angry about Wall Street money grabs, and Washington’s perceived bumbling response to those grabs.
If you aren't ready for the inconvenience of switching your bank, check out MainStreet's look at How to Get Around New Debit Card Fees!