The days of the easy fee grab may be coming to an end. Bank of America's failed plan to impose a $5 monthly debit card fee led to a 20 percent increase in closed accounts in the last three months of 2011 and a public relations headache, which other companies may be keen to avoid.
Asked about the fee debacle in a conference call with investors last week, Bank of America CEO Brian Moynihan said, "So I'd say that yes, we had some impact from the $5 debit fee. That's why we made a decision to reverse it."
The incident may lead to companies thinking again before levying fees on services that have traditionally been free. Verizon Wireless canceled a $2 fee for single bill-pay transactions online or via telephone in December, just one day after the telecommunications company announced the fee.
"The BofA fiasco over charging customers a fee just to use their debit cards should be a lesson to other banks that consumers are angry that their practices wrecked the economy and that consumers now realize that they have choices," said Ed Mierzwinski, director of the consumer program with the U.S. Public Interest Research Group. "Banks will now be careful to only attempt to impose fees that add value, as opposed to nuisance or "gotcha" fees. Unfair fees now result in consumers voting with their feet."
During an earnings conference call on Thursday, Moynihan revealed the $5 debit card monthly fee, proposed in late September and rescinded just one month later after public outcry from customers, led to an "elevated level of account closings in the quarter": a 20 percent jump in the fourth quarter of 2011 compared with 2010.
"That's way we pulled it back," Moynihan said after an analyst asked if the decrease in interest-bearing accounts - unlike at other banks in the previous quarter - was related to "the snafu" around the proposed debit card fee charge.
Bank of America reported earnings of $2 billion in the last three months of 2011, up from a net loss of $1.2 billion in the same period a year ago, boosted in part from a one-time gain on the sale of China Construction Bank.