Yesterday, Bank Of America announced it would begin charging a $5 monthly fee for some BofA customers who use their debit cards to make purchases. Not surprisingly, this did not go over well with Illinois Senator Dick Durbin, one of the leading proponents of swipe-fee reform.
Writes Durbin in statement released last night:
It seems that old habits die hard for Bank of America. After years of raking in excess profits off an unfair and anti-competitive interchange system, Bank of America is trying to find new ways to pad their profits by sticking it to its customers. It’s overt, unfair and I hope their customers have the final say.
Earlier this year the Federal Reserve determined that the interchange fees Visa and MasterCard fix for big banks grossly exceed the cost of processing a debit card transaction by some 400%. These hidden fees were designed to boost big-bank profits by charging small businesses and merchants every time a debit card was swiped. And profit they did. Bank of America hauls in billions in debit interchange each year.”
Thankfully, on October 1st that flawed system will be replaced by a more transparent and competitive market. Swipe fee regulation will still allow banks to cover the actual costs of debit transactions but will rein in the banks’ excessive profit-taking. Small business and merchants will benefit from fee relief and consumers will benefit from lower prices. And banks that try to make up their excess profits off the backs of their customers will finally learn how a competitive market works.
Durbin was the Senator behind recent legislation that intended to cap swipe fees, the amount of money banks make from each debit card transaction and which currently averages $.44, at $.12 per transaction. However, after a huge amount of lobbying from the banking industry, the cap was finally set at $.21. That cap kicks in tomorrow, Oct. 1.