Bank of America Has It Right On Fees, So Back Off
The Wall Street Journal on Thursday reported that Bank of America was "working on sweeping changes that would require many users of basic checking accounts to pay a monthly fee unless they agree to bank online, buy more products or maintain certain balances."
A Bank of America spokesperson says that "there is nothing new in the Wall Street Journal article," since the company had previously disclosed the "new solutions we are testing in Massachusetts, Arizona and Georgia, and all of them offer ways to avoid monthly maintenance fees. If customers do their basic banking online or via ATM, there are no fees."
The spokesperson confirms that a customer who only has a checking account with Bank of America, can avoid all service fees by switching over to electronic banking, which includes free electronic bill paying.
Bank of America's plan last year to institute a $5 monthly fee for the privilege of using a debit card was not well thought out, and after a predictable outcry, the company backed off.
This time it's different, and the company has no choice. The recent political and regulatory curbs on deposit account service charges began on Aug. 15, 2010, when the Federal Reserve implemented new rules requiring banks only to provide expensive ATM and debit card overdraft protection for customers who previously signed up for the service.
The first full quarter of operations under the new rule was the fourth quarter of 2010, when Bank of America's service charges on deposits accounts dropped 36% from a year earlier, to $$1.3 billion, according to HighlineFI.
When the "opt-in" rule went into effect, Bank of America eliminated all point-of-sale overdraft protection for debit card purchases, which a company spokesperson says "has significantly limited customers' ability to unknowingly overdraw their accounts and eliminates unexpected overdraft fees on these transactions."
For ATM transactions that could cause an overdraft, Bank of America says "we alert customers in advance that a transaction might cause an overdraft and result in a fee, and the customer can choose whether or not to proceed with the transaction."
The company in November settled a class action suit over maximizing overdrafts by processing the largest transactions first on a daily basis, by agreeing to pay $410 million to 13.2 million customers whose debit card overdraft fees had been maximized, when the bank processed larger transactions first.
The latest megahit on fee revenue was the Federal Reserve's clampdown on the interchange fees large banks charge merchants to process debit card purchases, as required by the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act.