October 4, 2011 -- The American Bankers Association is firing back at President Obama for his comments in an interview about bank fees, including Bank of America's move to add a monthly fee for customers to use its debit cards.
With customers outraged over Bank of America's announcement last week they will charge a $5 monthly fee for debit card purchases, ABC News' George Stephanopoulos asked President Obama on Monday if he could put a stop to the fees.
"What the banks are saying is-- that 'Rather than take a little bit less of a profit. Rather than paying multimillion dollar bonuses. Let's treat our customers right.' And this is exactly why we need this Consumer Finance Protection Bureau that we set up that is ready to go," the president said.
The president said he hopes banks will decide that raising fees for consumers is "not good practice."
Frank Keating, CEO of the bankers' trade group, said in response that "it's disappointing and puzzling that the president would attack a private corporation for responding to price fixing that has fundamentally altered the economics of offering a debit card.
"As a direct result of the Durbin Amendment, consumers have started paying for financial services they previously enjoyed free of charge," Keating said in an emailed statement. "Unfortunately, this proves that whenever government tries to control pricing of a product or service, consumers lose."
But Norma Garcia, manager of Consumers Union's financial services program, said the $5 fee is not necessarily a direct result of the Durbin Amendment, which limited the transaction, or interchange, fee credit card companies can charge merchants to about 21 cents.
"Even with the new interchange fee cap, banks are still collecting enough money from retailers to cover the costs of debit card transactions," Garcia said. "Bank of America's $5 debit card fee appears designed to generate extra income for the bank rather than simply covering the costs of providing debit services. Customers who are unhappy with the fee should consider switching to another bank."
A spokeswoman for Bank of America, which has struggled with a declining stock price and pile of bad mortgages after acquiring Countrywide, has said the "economics of offering a debit card have changed with recent regulations."
Bank of America, based in Charlotte, N.C., will waive debit card charges on premium accounts and for Wealth Management/Merrill Lynch and US Trust clients. Customers will still be able to get cash through ATMs, use online bill pay and mobile phones for free.
The company's web site is still experiencing sporadic issues, which the company denies is related to the fee announcement or hacking.
It is unclear if other banks will follow suit and implement debit card fees. Chase and Wells Fargo are testing $3 fees in limited markets, but both banks say they have no immediate plans to roll-out debit card fees nationwide.
Frank Sorrentino III, chairman and CEO of North Jersey Community Bank, said he agrees with Keating's response, but consumers do not have to "lose" if they choose to bank elsewhere.
"At the end of the day, consumers always have the choice where they want to bank. Dealing with a community bank is much different than dealing with the institutions," Sorrentino said, whose bank has about 14,000 customer accounts. "If you care about how your relationship is treated, you're much better dealing with a community bank."
Sorrentino, who is also a member of the American Bankers Association, said there are about 7,600 banks in the country and about 6,500 of those are classified as community banks.
"And I will tell you the majority of community banks do not charge fees for their debit service products," Sorrentino said.
Sen. Dick Durbin, D-Ill., encouraged unhappy Bank of America customers to bring their business elsewhere.
"Bank of America customers, vote with your feet, get the heck out of that bank," Durbin said on the Senate floor on Monday afternoon. "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."
Durbin said consumers are understably upset about the fee announcement.
"It is hard to believe that a bank would impose such a fee on loyal customers who simply are trying to access their own money on deposit at Bank of America," he said. "Especially when Bank of America for years has been encouraging their customers to use debit cards as much as possible."