$5 Debit Card Fee: Don't Blame Banks but Durbin, Dodd, Frank, the FedSubmitted by bobbyw24 on Tue, 10/04/2011 - 12:38
On Thursday, Bank of America announced that, starting the first of the year, they would be charging debit card users $5 a month for the privilege as a way to recoup lost income under new rules from the Federal Reserve. The rules, which took effect on Saturday, October 1, limit the amount banks may charge merchants accepting debit cards to 21 cents per transaction, down from 44 cents previously. Under the Dodd-Frank bill passed in 2010 — initially proposed by former Senator Chris Dodd (D-Conn.) and Representative Barney Frank (D-Mass.) — banks processing the transactions will see their income from those fees drop by about $10 billion a year, all in the name of fairness and equity, according to the Federal Reserve, which determined that the new fees are “reasonable and proportional.” According to industry sources, the real cost of handling each debit card transaction amounts to “a penny or two,” and so politicians decided this called for action.
One of those was liberal interventionist Senator Dick Durbin (D-Ill.), who sponsored the swipe fee amendment, saying,
It seems that old habits die hard for Bank of America. After years of raking in excess profits off an unfair and anti-competitive interchange system, Bank of America is trying to find new ways to pad their profits by sticking it to its customers. It’s overt, unfair and I hope their customers have the final say.
Earlier this year the Federal Reserve determined that the interchange fees Visa and MasterCard fix for big banks grossly exceed the cost of processing a debit card transaction by some 400%. These hidden fees were designed to boost big-bank profits by charging small businesses and merchants every time a debit card was swiped. And profit they did. Bank of America hauls in billions in debit interchange each year.