Durbin's (over)reaction to the Bank of America Debit Card fee

So Sen. Dick Durbin, D-Ill., is back at it again. As if he hasn't wreaked enough havoc on the banking industry, he's now telling customers to "vote with your feet. Get yourself out of that bank". He is, of course, talking about Bank of America (BOA) and their recent decision to begin charging $5 per month when a customer uses their debit card. The fee goes into effect in 2012.

It was his legislation (the Durbin Amendment) capping the interchange fees on these transactions that started this whole mess in the first place. The legislation was, ostensibly, aimed at helping the consumer. Not quite. What it has done is lowerer what the retailers are paying and reduced the interchange income to the banks. I think it is safe to say that retailers are not going to pass on these savings to consumers. So, do you see any benefit to the consumer? I don't.

Now, according to Durbin, Bank of America is going to "push people away from debit cards into credit cards, which are not regulated..." to increase their interchange rate. What Durbin seems to dismiss is an alternative: using cash for their retail purchases. You see, if you are a BOA debit card holder, there is no monthly charge for using a BOA ATM machine. But that doesn't get mentioned in his grandstanding on the Senate floor.

So here's my personal message to Sen. Durbin. Consumers will make their own decisions about how to deal with this. Believe me, BOA is taking plenty of heat for this from their customers. Maybe, instead of the government getting more involved in everyday banking, they should focus on governing. Seems to be a pretty strong need for that these days.

The real story behind the Merrill Lynch,Bank of America merger

On a rather long, often delayed trip to the West Coast, I had the opportunity to read Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America by Greg Farrell. While it is a fascinating tale of the clash of two very different organizations, one about to fail and another on life support, it was of particular interest to me as a former BofA employee. The descriptions of the culture of the bank and in Charlotte was spot on.

I became an employee through the merger of a bank in Baltimore to NationsBank in 1993 , the predecessor of BofA. I remember the teams pouring in from Charlotte to help us "learn" the bank's way of doing things. Even then, it was clear that we were the acquired and they were in charge. It was described as a meritocracy and it was; if you hailed from Charlotte. Based on this story, that appears to still be the case today.

With even a slight understanding of the history of Merrill Lynch, you can only imagine the conflict. This is a great read and gives a good behind the scenes look at the near collapse of the financial system.

Bank of America makes the first move

As everyone in the financial services industry, and many consumers are now aware, Bank of America announced they are ending overdraft fees on Debit Card transactions beginning this summer. You know it's a big deal when the story makes it to the Today Show. This is their answer to the recent Regulation E changes enacted by the Federal Reserve that take place later this year.

On the surface, this appears to be a consumer friendly solution from a bank that has been battered in the public relations arena. They've taken a lot of heat (often unfairly) for the bank bailout and the mortgage crisis. They really need something to repair their image.

Our bank, on the other hand, is taking a different approach. We see this as an opportunity to both educate consumers and allow them to make the decision, not us. For more information, take a look at this post on our bank's web site. As always, I'd love to hear your thoughts.

Social Media Levels the Playing Field

Last week, there was an interesting article in the American Banker about the use of social media. It focused on both large and small banks and their integration of these tools into their companies.



Bank of America, for example, uses Twitter to monitor complaints and respond to customers. They have six people who are dedicated to staffing the Twitter account @BofA_Help and monitoring conversations on Twitter. A smaller, regional bank in Wisconsin, North Shore Bank, uses Facebook as a way to connect with customers, provide photos and videos, and conduct contests.



Since we began, we've used these tools in much the same way with very encouraging results. Given our size, we don't have anywhere near the same number of resources working on our Twitter accounts (@1stMarinerBank and @FMBCustServ), much less full time. The beauty of social media, and the applications available to monitor activity, is that you don't need to have a lot of resources. It provides a more level playing field where size and scale are no longer issues. In fact, I would contend that we can actually respond more quickly and in a more personal way than our larger competitors. And in this industry, like many others, the only way to differentiate ourselves is through a positive customer experience.