Bank of America’s New Fee is Yet Another Example of Congressional Ineptness

by Evan

Sometimes when I read Congressional Members’ rationale for certain bills it makes me literally want to rip my hair out of my head.  Luckily I refrain since I am the only one of my brothers with hair left.  It is ridiculous that no one seems to learn the law of unintended consequences.

A Company exists to provide a service to make money.  The executives and board members of that company have a fiduciary duty to be profitable.  So when someone impedes on their ability to make money it is their RESPONSIBILITY to figure out a way to make up the shortfall.

It happened with the CARD ACT which was supposed to protect credit card users.  If I am allowed to quote myself paraphrasing someone else:

  1. Higher Interest Rates – The average jumped over 2% since enactment
  2. Higher Fees – Whaaaat? I think this Act was going to save us from higher fees? Nope. The Act just makes them change where they get their money from
  3. Less Credit – You are going to restrict the credit lenders so they have to be more careful
  4. Non-Working Spouses May be Denied Credit – A really interesting unintended consequence that should have been known since one of the provisions is that if you don’t work you can’t claim household income as your own.
  5. More Bankruptcies – Not sure I agree with this one as there is a difference between correlation and causation

Well congress and the media are again surprised that something they did had a negative unintended consequence.

Bank of America’s New Fee is Not Their Fault It is Congress’

Let me be clear, I am not a fan of Bank of America.  I think they are a bureaucratic nightmare of a company that people use because they think they are better because they are bigger.  Notwithstanding, their new fee is NOT their fault.

Bank of America’s New Fee

As reported by Forbes,

Starting early next year, Bank of America will charge $5 in each month that customers use a debit card for a transaction. There will not be a charge in the months you don’t use your debit card, and ATM withdrawals are not included.

Word of this new fee came two days before the October 1 implementation of the new interchange fee regulations for debit card purchases. Banks are expected to lose billions of dollars with this reduction in swipe fees. Before the recent legislation, the interchange fee averaged 44 cents per transaction. Now, the reduced fee will be 21 cents plus an additional amount to cover losses from fraud. The interchange fee on credit cards did not change.

Wait a minute, so you (read: Congress) took away half of the fee they received per transaction and are outraged that they need to make up the money somewhere else? When then you are just stupid.  Period.

If I were a Bank of America stockholder I would be applauding this move. I want profits and if the government shut the door the company better find a window!

You may also like

28 comments

Jeff September 30, 2011 - 9:59 am

This fee is basically pretty week and exactly what people said would happen. Instead of the biz owners taking it on the chin, consumers take it in the shorts. I use a credit card for all my purchases, so this doesnt bother me though.

Reply
Evan October 3, 2011 - 8:22 am

Just drives me nuts that this couldn’t be foresaw by Members of Congress…does Canada have similar legislature?

Reply
LaTisha September 30, 2011 - 11:08 am

I completely disagree! They don’t have to make up for the fees lost with the bill by nickle and diming current customers. Instead they can start doing business as a depository institution and take deposits and make money from making loans.

Reply
Evan September 30, 2011 - 11:57 am

But that is not who they are, nor has it been for the better part of a decade or two. You don’t have to bank with them nor do you have to invest in them.

Like 92% of the companies in the world they exist to make money. This is just another way.

Reply
LaTisha September 30, 2011 - 9:43 pm

The 5 dollar fee is overkill though. Why not just add an extra 3 cents to every swipe and match the revenues with the action? I still think it’s a bad business decision. They must have some Netflix decision makers on the board.
I stopped banking with them a while back and after the drop from 16 bucks back to 6 I’ll stay away from the stock too.

Reply
Evan October 3, 2011 - 8:28 am

Add an extra .03 cents to each person’s swipe or to the business? If it is to the business then that would fly in the face of Dodd-Frank…if it is to the consumer than I think the problem is that everyone would notice and flood their customer service line.

Reply
Dom September 30, 2011 - 11:47 am

This is just an easy way for BOFA to lose business faster. They already have a black eye for their Countrywide dealings. I’m not sure who would put up with such an asinine fee.

Reply
Jon October 1, 2011 - 8:33 pm

I agree. I think the fee is utterly ridiculous. “Asinine” is a perfect description of it. Who would want to bank with them after it? Heck no.

Reply
Evan October 3, 2011 - 8:30 am

I don’t use them because of their other fees, but I love the fact that they are standing up to the government’s ASININE regulations

Reply
memyselfi October 4, 2011 - 6:55 am

You said ” I love the fact that they are standing up to the government’s ASININE regulations.” You really believe the bank(s) are victims here? Either you’re a shareholder or the quintessential banking customer.

Reply
Evan October 4, 2011 - 8:29 am

Not a shareholder and probably the worst banking customer as I put everything through my low/no fee account at ING.

I am just a guy who does not like the fact that the Federal Government can’t grasp the fact of unintended consequences.

Jeff September 30, 2011 - 2:04 pm

I totally agree and if you didn’t write it I would have. Companies have to cover their overhead and maka profit. I read some where that it cost shot 15k a year to maintain and run A ATM machine. They have to cover that dome how. I was ok paying a transaction fee for the convienece of getting my money anywhere. Instead og having to go to the branch every time. Things in life cost and can’t always be free

Reply
Evan October 3, 2011 - 9:01 am

Do you use BofA?

Reply
krantcents September 30, 2011 - 5:21 pm

There are always unintended consequences to change in laws. Hopefully, congress will amend the law to fix it. This is why I rather they do not mess with the taxes.

Reply
Evan October 3, 2011 - 9:07 am

how about a flat tax?

Reply
Doctor Stock October 2, 2011 - 1:12 am

Yip, nickel, dime and now $5 bill em… this is so ridiculous.

Reply
Evan October 3, 2011 - 9:08 am

Are you a customer?

Reply
Dana October 2, 2011 - 5:03 pm

As a consumer I agree that the $5 fee is ridiculous. I don’t bank with them. But they are just a for-profit company doing what they are supposed to do – make a profit. Can’t fault them for that.

Reply
Doctor Stock October 2, 2011 - 5:07 pm

The problem is that we’ve already bailed them out… giving Billions to these “too big to fail” types. Now, they’ve gone to the government who won’t provide more money… so, they turn to the source of the governments funds (us!) and “tax” us. Let them fail… perhaps we’ll be presented with competitive options for our banking needs.

Reply
Evan October 3, 2011 - 9:11 am

I think your anger is preventing you from seeing that “too big to fail” is a completely different world then a for profit business trying to make money.

I agree with the failing, but not getting angry at BofA

Reply
Don October 2, 2011 - 10:09 pm

While I don’t like the fee, I thought the move and new requirements by congress was stupid too. Way to make our bank less competitive and tight with credit.

Reply
Evan October 3, 2011 - 9:11 am

Agreed! We’ll see if the other mega banks follow suit.

Reply
20's Finances October 3, 2011 - 8:20 am

What a provocative post! Great work. Like others, I hate the idea of paying $5 a month if I use my debit card. I do use my debit card, but only about once or twice a month (places that don’t take credit). Fortunately, I don’t use BofA, nor will I ever!

Reply
Evan October 3, 2011 - 9:27 am

Same, I don’t use BofA nor will I…but good for them for saying NO to the government

Reply
IIW October 4, 2011 - 6:58 am

Just wait until they come out with new regulation to fix the problems caused by the old regulation. 🙂

Reply
Evan October 4, 2011 - 8:43 am

HAHAHAHAH 100% will.

Reply
John October 4, 2011 - 10:23 pm

I disagree. Congress did make huge mistakes when they allowed anti-competitive mergers and anti-competitive behavior and allowed banks like Bank of America to act in ways that do not allow free markets to serve the society.

Trying to cope in an environment that you have created that fundamental flaw makes everything difficult. but if you are going to allow anti-competive business to exist the only rational response is then to regulate them. Otherwise you get crazy things like the amount USA companies had to pay to the credit card companies in excess of the going international rate.

Yes attempts to cope with a situation where you have allowed markets to be corrupted by those with the most gold is very difficult and I suppose you could try to blame the actions in trying to cope with that for being wrong. But it is wrong in a very minor way. The problem is in not allowing markets to work as they should because you allow those with the gold to take anti-competitve market actions.

Reply
Steve October 6, 2011 - 11:06 am

I totally get that BofA are trying to make up for a severe dent in their profits. But as a BofA customer that almost never writes a check or visits a branch, I don’t see why they should charge me a fee for making things easy for them. Almost all my transactions are electronic. Are they seriously suggesting that it costs them more than $0.21 to perform a debit card transaction?

Anyways, for me, this is the straw that broke the camels back. I’m closing all my accounts and taking my money elsewhere.

Reply

Leave a Comment