Debit Card Fees and the Social Media Backlash

As I discussed in my last post, debit card fees have been a hot topic the last 60 days especially for the big banks. Now we see many of these same banks, including SunTrust and Regions Bank, discontinuing their monthly fees and refunding those customers who had paid in previous months. Today, Bank of America finally conceded and are cancelling their plan for the $5 fee scheduled to start in 2012.

What is so fascinating is how much of an impact social media had on these decisions. For example, there was a young woman in D.C. who started a petition on a website, change.org, to "Tell Bank of America: No $5 Debit Card Fees." She's gathered over 300,000 signatures supporting her cause.

There have been thousands of Twitter comments and blog posts expressing outrage over the proposed fee from BOA. One recent post is a pretty good example (with a Halloween theme): ShooterOneSix "What's difference between a vampire & Bank of America? The vampire is only after your blood while BoA wants to suck your CASH too!#ows #p2." It has even spawned a Bank Transfer Day on November 5th when big bank customers are encouraged to move their accounts to a local credit union. Again, this has been spread through social media channels with incredible velocity.

So what's the lesson here? There are many, of course. One that immediately comes to mind is think before you act. While it may sound good sitting around a boardroom and crunching the numbers, this plan should never had made the light of day. If these banks had engaged their customers in a dialogue beforehand, I'm quite sure they would have seen the negative impact immediately. Remember, social media is a two way street. Now they have yet another publicity nightmare to clean up.

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.

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.