Reuters broke the news today that Bank of America was abandoning its plan to charge its customers $5 per month to use its debit card. The plan had provoked outrage and memberships in credit unions had picked up substantially as customers lined up at the exit ramps.
Whether BofA was responding to customers or just realized the jig was up when none of the other major banks followed suit is debatable. The recent painful experience of Netflix that surprised its customers who by all accounts loved the service by increasing prices and splitting the streaming and dvd services was certainly instructive. Almost a million customers bailed out of Netflix sending the firm reeling.
Bank of America faced the same fate as Netflix with plenty of other banks and credit unions ramping-up their marketing messages eager to take market share from BofA as a result of its decidedly customer un-friendly ways. It was not Dodd-Frank that saved customers it was fear of competition.
Banks have been piling on fees in response to the Dodd-Frank provisions limiting their hidden fees such as interbank changes or swipe fees. So instead of cutting costs the banks are loading up on nuisance fees taking a page out of the airline pricing book. But blaming banks alone would be misplaced anger. The only good news in all of this is that by forcing all the fees and charges to be transparent and collected directly from customers allowed competitive pressure worked. There is a clear and compelling lesson in this issue for Americans in the health care debate.
ObamaCare is worse than Dodd-Frank and will have worse consequences. Dodd-Frank just like Sarbanes-Oxley were both mean spirited knee jerk reactions that have cost us more money and done us less good than some of the sins they sought to correct. Only competition can fix these problems but legislation is the mother’s milk of lobbyists and campaign contributions so only bills like these keep the money flowing to politicians. Competitive markets would produce better banking, better health care and better politics.
I know its petty revenge but it felt good–I stuck it to BofA three times.
- Bank Of America Will Lobby Congress To Ensure $5 Fee Stays And America Loves It (BAC) (businessinsider.com)
- BofA’s $5 Debit Card Fee Is a Tax on the Disloyal (blogs.wsj.com)
- More Banks Scrap Debit-Card Fees (newser.com)
- Some big banks back down from debit-card fee (bottomline.msnbc.msn.com)
- Bank of America Begins Walkback on $5 Debit Card Fee (news.firedoglake.com)
- Dems want investigation on BofA fee (politico.com)
- Geithner on BofA Fees: We Will Prevail (newser.com)
- BofA Customers May Start Taking Their Business Elsewhere (mediabistro.com)
- New Bank Fees Drive Customers to Credit Unions (foxnews.com)
- Public Outrage Wins One (lewrockwell.com)
- Chase drops debit card fee, BofA to adjust plans (seattlepi.com)
- Customers Revolt, and Win? Banks Back Off New Fees (moneyland.time.com)