Bank Of America Debit Card Fiasco Resulted In 20% Jump In Closed Accounts

Though Bank of America surely expected a certain amount of attrition when it announced it would begin charging a monthly fee for some customers to use their debit cards to make purchases, it probably didn’t expect that it would see a full 20% increase in the number of customers saying “bye-bye” to BofA.

But that’s exactly what the bank says happened during the final three months of 2011, during which fed-up account holders opted to move their money elsewhere.

“I’d say that yes, we had some impact from the $5 debit fee,” said BofA CEO Brian Moynihan during a conference call with bank investors about the “elevated level” of account closures. “That’s why we made a decision to reverse it.”

Ed Mierzwinski of the U.S. Public Interest Research Group tells ABC News that there is much for banks and other companies to learn from public relations debacles like the BofA fee.

“The BofA fiasco… 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,” he says. “Banks will now be careful to only attempt to impose fees that add value, as opposed to nuisance or “gotcha” fees.”

BofA Debit Fee Plan Led to 20% Jump in Closed Accounts [ABC News]

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  1. Bort says:

    sometimes two wrongs can make a right

    • pop top says:

      What is the second wrong? Surely it can’t be customers standing up for themselves and switching banks.

      • Loias supports harsher punishments against corporations says:

        I think wrong #1 is fucking the economy with a sharp stick, and wrong #2 is this debit fee.

  2. Cat says:

    Money talks, bullshit walks, can’t touch my 3 lock box..

  3. tbax929 says:

    Consumers are finally using the power of the internet for good. This, the Netflix backlash, and the SOPA backlash are all examples of what happens when stories go viral and people get up in arms (rightfully so) about perceived mistreatment of them by big businesses.

    Sometimes I wonder if big companies think we just use the net for porn… They always seem so surprised by the backlash they receive.

  4. Costner says:

    And what percentage of those customers was the type of customer that BOA really hoped would leave? I know they can’t admit it publicly, but people who carry small balances and who would be most heavily impacted by their proposed fee are the exact type of customers banks don’t want.

    Plus – in a few quarters when people start moving accounts back, BOA can sell their new accounts metric within quarterly earnings report to make it look like they are growing at a rate far greater than their peers.

    • MikeTastic says:

      This. Exactly this.

      I’m sure the vast majority of the customers that left BoA were unprofitable customers that kept $500 in checking and not much else. Like you said, they can’t admit it publically, but they’re probably thrilled.

      • MMD says:

        Then why pull back on the fee, if everything is working out exactly as planned?
        Unless they never really wanted to implement the fee to begin with and used it as a ploy to get rid of unprofitable customers? Because that’s the only way your logic works…

        • MikeTastic says:

          I’m sure they meant to keep the fee the whole time, but were surprised at the backlash. They probably wanted to rid themselves of as many unprofitable customers as possible and then make the rest profitable by charging the fee. They misjudged the backlash, but still probably wind up ahead of the game by getting rid of unprofitable accounts.

        • Bsamm09 says:

          Pull back on the fee when the unprofitable ones leave so that you save a little face and pretend you are not unreasonable and listen to the public.

    • AtlantaCPA says:

      While I agree that many were likely unprofitable customers now, keep in mind that part of the business model for banks is to have some customers that are unprofitable now, build brand loyalty with them, then one day when they roll over their 401k to an IRA they will pick their bank they’ve always banked with to handle the IRA (as an example).

      Most of their profitable customers probably had a period in their lives when they were unprofitable some time in the past. Trust fund babies would be one exception.

      So in the end they lost the lifetime income from ‘potentially profitable customers’ which is still a bad thing if you are a shareholder who is taking the long view.

      • whylime says:

        This exactly! When I first opened a BofA account, I was a poor college student and the account was an easy way for my parents to help me pay for tuition and rent, etc. They’d deposit some cash every month into the account, and I would use it to help pay for books and classes and groceries. Was I that profitable? No, not really. I never really had more than a few hundred dollars at a time in that account.

        A few years later and I am a respectable member of society. I have a decent job, I make a decent wage, and I have a sizable nest-egg. Am I profitable now? I’d like to think yes. Does BofA get any part of it? No. They lost my business when they started pulling these shenanigans and I ended up switching to a local credit union. From what I keep reading about them, I probably won’t ever switch back.

    • fdawg4l says:

      Banks make money on over draft fees. The people that left are the ones with the least money, yes, and the most exposure to these kinds of fees. Sad how banks prey upon the people least able to defend themselves. At least 20% got up and walked.

      • Costner says:

        Correction – banks used to make money on overdraft fees. With recent legislation, these fees are much more difficult to collect because first banks can no longer reorganize transactions from largest to smallest (meaning fewer overdrafts which is a good thing for consumers) and second, customers have to knowingly opt IN to have debit card transactions overdraft rather than being declined at the point of sale.

        How many consumers do you think are voluntarily opting in to this program? Not many.

        So no… there isn’t nearly as much profit to be made from the small balance account holder as there was a few years ago.

        As far as your comment about people being least able to defend themselves, is there a direct link between financial ignorance and small balances?

        • ZachPA says:

          I bet there are a lot of customers who unknowingly opted into the overdraft ability. When I discuss checking accounts with people, sometimes I hear that they paid a couple of overdrafts during the past year. I always ask why, and when I find out it’s because they used their debit cards after depositing something and forgetting about the float, I always figure out with them that it’s really because they opted in.

          I’ve found that banks predominantly used two tactics to get customers to opt in:

          1. YOUR ACCOUNT ACCESS COULD BE CHANGING! Don’t let it happen. You don’t wanna really change your account access do you? All you have to do to prevent this is to opt into this here. Hurry, though, because if you don’t opt in by August 15, 2010, you will lose out!

          2. DON’T BE EMBARRASSED BY A DECLINED CHARGE EVER AGAIN. Imagine that you’re out to lunch with a bunch of your colleagues. You offer to pay for lunch, even though you know money is tight this month because of an unexpected bill. Because you are close to your balance, you know if it goes over, your charge will be declined, but if you opt into our service, your charge will go through, and you just pay a nominal fee afterward for your convenience. Never wait in line to be told your card is declined ever again. Never get excited to see a movie only to be shown the door when your card is declined. But hurry, because you need to sign up by August 15, 2010 for your benefit to remain in full force!

          Of course, the problem with both of those tacks is that, while legal, they are very misleading. The deadline was not for customers to opt in, the deadline was for the law controlling bank’s ability to charge overdrafts. As a result, banks instilled a sense of urgency into their unsuspecting customers, and we all know that urgency trumps thorough reading and understanding of the materials they send. Account holders can opt in at any time they want, and they can opt out at any time they want–daily, in fact!

          I’ve also found that banks make it very, very easy to opt in on their websites. Sometimes it takes only a click, and sometimes it takes a click and a verification of identity over and above the usual login. Opting out, however, is much more difficult. Banks usually bury the link to opt out deep within the website, and when you follow the link, they will present you with usually at least two or three pages verifying, “do you really want to opt out?” “or do you really want to lose this ability…?”

          My friends from before who I speak to about this are invariably amazed to find out that the overdrafts they paid last year could have been avoided if they hadn’t been suckered to opting in. The ironic thing is that those who are most lazy about their finances are those who are most protected by the law, and those who are more proactive and take an interest in keeping daily tabs on their money are the ones who were suckered the most into opting in.

          • NebraskaDan says:

            Okay…I’m sure your friends are lovely people and all…but I must tell you this horrible news. They are idiots. Anybody dumb enough to be sucked into the Opt In option deserves what they get.

            I used to work in branch banking on the account opening level, and I told every single person to opt out. Guess what!?! The goons that you would expect (i.e. stupid people) opted in against my advice. I’d see them a week later bitching about fees. They got nothing back. Because it’s the idiot tax, see?

            • ZachPA says:

              Some are lovely, and some are not, just like some are idiots and some are not. But that not withstanding, the majority of them who I was referring to in my previous post are not as financially savvy as you and I. And, because our schools no longer teach financial self-sufficiency like they used to, they are primarily a bunch of 18-30 year-olds who have tried to figure out for themselves what works and what doesn’t. When an official looking letter from their bank comes along and tells them they need to act to save themselves and their accounts, they call the number listed on the page–or the ones who are suspicious of phishing call their bank branches–and are transferred to a specialist whose job it is to extract the largest number of opt-ins possible, and who gets paid a spiff for every single opt-in generated.

              I’m sure as a branch CSR you had the customers’ best interests at heart, but if your boss told you that it was your job to sell the opt-in, or better yet if you received a cash bonus for every customer you successfully sold an opt-in, you would do it. Or, if you would complain of irresponsible business and quit or get fired, the guy/gal they hire to replace you would.

    • BurtReynolds says:

      That would probably be me. In 6 years I might have paid BofA a total of $10 in “out of network ATM fees”. Probably not the type of “performance” they would hope for out of an account. Especially someone in the their 20′s.

    • milkcake says:

      You obviously work for the bank or is an analyst for the bank to know this too well.

  5. td45 says:

    i’d be interested to know exactly what the figures are. “20% jump” could be interpreted many ways. Could be that they expect a certain number of closings a year and this year was 20% higher than last… or it could be that they lost 20% of all accounts (unlikely but this would be a huge deal).

    also, is it 20% of the dollars they have BofAs portfolio of accounts? becuase 20% of all accounts could be lots of small accounts which would equal to less than 20% of all the money the hold..

    • Bunnies Attack! says:

      It says 20% jump. So if they normally expect 1% of accounts to close in a year, this year 1.2% of them closed.

  6. dolemite says:

    I got a notice that my current credit card was being converted (I guess bought out) into a BofA credit card. Ummmm…no. Guess I’ll have to close the account once I’m done paying it down in a month or 2.

    • George4478 says:

      I got a pair of those notices yesterday.

      One card has been open since 1984, one since 1995 — I have no plans to closing them. I carry no balances so these are a positive benefit to my credit report in a few ways.

    • pythonspam says:

      I had a card thru MBNA which was absorbed by BoA and the only things that changed were they interest rate jumped 2 points (which never affected me because I pay off the card every month) and even though the account is still listed as a Star Trek Visa (had a nice starry black card with the Enterprise A), it has become the regular red-white-and-blue BoA design.

      Serious sapping of geek cred: Thanks a lot, Bank of America.

  7. Gman says:

    I read it less as a ” we heard the consumers and listened” and more of a “dang we got caught…Hey Bob, what is next on the ‘ways to screw our customers so we get more money’ list?”

  8. cornstalker says:

    Why did this surprise BofA? Did they think every bank out there charged monthly fees just like theirs? Did they think that they were so “sticky” that consumers would rather pay up than bail out? My own bank instituted some “junk” fees of its own and seemed genuinely surprised that it shed customers as a result, as I heard from a friend who works there.

  9. kataisa says:

    Mierzwinski of the U.S. Public Interest Research Group tells ABC News that there is much for banks and other companies to learn from public relations debacles like the BofA fee.

    The only thing Big Banks have learned is to wait out the initial outrage and then try to implement a smaller fee later on to see if the public will acquiesce like they usually do.

    • infinityspiral says:

      Yeah I agree. You wished they learned something from it.

    • econobiker says:

      The terminology is “phased roll-out of new fees”. Start in smaller markets and roll up to the larger ones. Instead some BOA empty suit VP was banking on the additional profits to bump up the 2011 balance sheet. Oops didn’t work like that…

    • ZachPA says:

      Exactly. Learning experience it was. For both customer and bank.

      Facetiously…:

      Dear Customer,

      We are thrilled to have you but because we can’t make any money anymore, we are going to charge you $5.95 every time you swipe your debit card. This will help us maintain our $87 kajillion profit this year.

      K thx,

      Us.

      —–

      Dear Customer:

      We really goofed. We didn’t think you would start shooting our executives, looting our branches and placing pipe bombs in our drive-through teller tubes.

      So to make amends because we really value your business, we are going to reduce that new $5.95 charge to $1.95 per debit. You will save FOUR DOLLARS every time you use the card! Go ahead, it’s ok! We can live on only $28 kajillion this year.

      As always,

      Us

  10. oldtaku says:

    Bah, 20% jump in their normal turnover rate is something, but it should have been 20% of all the masochists still using BoA jumping ship.

    • raydee wandered off on a tangent and got lost says:

      Compltely off topic: Your name makes me giggle. Makes me think “otaku,” which from my understanding means something like “obsessed fan” … and then old.

      So I imagine you being a frothing fan of antiques, at every yard sale and flea market at 3 a.m. to get all th best deals.

      That said, great name. :D

  11. raydee wandered off on a tangent and got lost says:

    I never banked with BofA, but I considered opening an account with them, just to close it.

    But then that would have proven to them that I exist, and the spam mail would likely have reached the point where I could recycle all of that paper into an entire deluxe set of Encyclopedia Brittanica.

  12. nearly_blind says:

    First I can’t believe so called journalists (OP article from ABC news) get away with not asking or finding out key info like, 20% increase over what baseline. E.g. 100000 closed accounts in 2010, 120000 closed accounts in 2011. In other words, how many additional people closed their BOA accounts.
    If this was asked by BOA refused to answer they should mentioned that fact.

    • bravohotel01 says:

      That would make sense in a world that existed prior to the ’90s, when newspapers jettisoned their experienced editors and reporters.

      Nowadays, a “job well done.” is when they get the transcription of the press release 90% typo-free.

  13. ancientone567 says:

    Really..Just screw BOA. I did business with them in NYC over 15 years ago and shortly closed the account and never looked back. It is no FAMILY friendly bank. You just are another lost number.

  14. dcarrington01 says:

    “That’s why we made a decision to reverse it.” Someone needs to tell him you cant get the shit back in the horse…..

  15. suez says:

    Hey, that’s me! I’m in the news!!!

  16. Laughing-man says:

    “Banks will now be careful to only attempt to impose fees that add value, as opposed to nuisance or “gotcha” fees.”

    Doubt it. In March 2012, I’m cutting up my BP Chase card because of their new “Improved New Policy” which effectively drops my 5% reward on gas purchases all the way down to 2%. Banks are just as greedy as ever in trying to recover from the CARD act. Don’t believe for a second that they will change.

  17. Megladon says:

    TCF bank is charging me 9.95 a month for not using my debt card 15 times a month. Guess who’s leaving that bank. Spread the word. Fee’s are for suckers.

  18. ronbo97 says:

    We’re MAD AS HELL…and WE’RE NOT GONNA TAKE IT ANYMORE !

    Seriously.

  19. SegamanXero says:

    I have left BofA as well… Not really on the peak of when everyone was switching, but I did gradually switch my direct deposits and closed out my account when all remaining charges where settled.

    I am now with a small bank, Salem Five and love it. I do miss being able to get a temp card, and having my picture on my card for security… But I don’t like how BofA was trying to scheme new fees to stick me with even more so.

    On a related note, my new checking account gets interest on it every month. I never even thought you could get that on a checking account… =)

  20. trencherman says:

    I’m surprised at all the people posting that the people who left BOA are losers. Maybe they are just intelligent. I left BOA eleven years ago, and have been very happy at my credit union. BOA’s fees are really stupid, and their service is abysmal.

  21. DrRonster says:

    Fee proposal was actually good for me. I’m always use CC’s and just hated it when I saw that the wife used the debit card and avoided a CC reward. I only wanted the debit card for ATM usage and now every debit card from every bank has been changed to an ATM only card forcing my wife to use the CC’s and getting rewards for it. In this instance it cost them to issue new cards that are labeled as ATM only.

  22. BurtReynolds says:

    Even though they had already changed their plans by the time I cancelled, the proposed fee gave me the kick in the pants I needed to finally stop doing business with BofA and move to a CU.

    I will say that BofA only tried to screw me once in six years (some $3 fee for a paper statement, even though I clicked online to not get them) and when I called them on it they quickly fixed it. Service wasn’t the issue I had with them, it was their business practices in general.

  23. superflippy says:

    As a former BoA customer myself, I’m going to say that the $5 fee probably wasn’t the only reason so many people left. It was probably just the last straw. It’s not like they’re a model of customer service to begin with.

  24. farker22 says:

    haha, fark these guys in the ass.

  25. ianmac47 says:

    It all really depends on what kind of customer stayed and what kind of customer left. If the departures were mostly crafty banker customers who generated few fees and many expenses, Bank of America is stronger having shed them.

  26. asten77 says:

    Can someone follow up with BoA and get to the bottom of the concept of a fee adding value? Surely they mean for them, not for their customers. If something comes along with that fee, it’s still reducing the value of what they’re giving you. I cannot logical conceive of a scenario in which a fee adds value.