Bank of America, the nation’s largest bank headquartered in Charlotte, drew more ire from consumers with its announcement that it would start charging a $5/mo fee for debit card use starting in January. With about 57 million customers holding debit cards, the $5 a month fee amounts to a little over $3.4 Billion/year. With the accelerating protests against the wholesale, government-sanctioned theft of the nation’s wealth happening on Wall Street and at over a hundred other locations around the globe, the timing couldn’t be more appropriate.
The Dodd-Frank Financial Reform Act, which sought to rein in the obscene profits of big “Too Big to Fail” banks like BofA, set a (still highly profitable) ceiling on the amount of the fee that merchants are charged to process debit cards. Instead of accepting that lower profit figure, BofA is making up the difference, and more, by charging consumers directly. It’s not a “per transaction” fee, because consumers could avoid most of those fees by simply carrying cash. The banksters, like drug dealers, know that people aren’t willing to COMPLETELY surrender their debit cards, so a monthly fee for having ANY access to one is more profitable.
Forbes magazine’s E.D. Kain actually praised the fees (sort of) in his October 1 column, offering an explanation from political blogger Kevin Drum that direct-to-consumer fees were more “transparant” and not as easily hidden or disguised. Kain quickly clarifies his stance, noting in an update: “This piece is in no way meant as a defense of Bank of America or the finance sector as a whole. I’m on record as a supporter of both the Occupy Wall Street protests and of breaking up too-big-to-fail banks.” He says that his intention is not to defend Bank of America, but to point out that hidden fees are more lucrative and generally target the poor, and that the announcement is a sign that the financial reform law is working.
Dodd-Frank: reining in the greed?
This whole thing really has to do with Dodd-Frank financial reform, which included a ‘ceiling” of 24¢ per transaction. The current average charge to a merchant, according to CNBC, is 44¢, more than four times the actual processing cost of 11¢. That 44¢, of course, is treated as a “cost of doing business” by retailers and passed on to consumers, so that as such, it amounts to a bank heist in reverse for consumers. Some suggest that the reduced charge to merchants WON’T be passed on to consumers, though, improving their own bottom lines. If so, then at least consumers can know that their money is being spent to help small business, rather than being “swiped” by TBTF banks.
That ceiling still allows for a more than doubling of actual costs, resulting in a tidy profit for banks. The extra 20¢ each that banks will no longer be allowed to charge amounts to about $3 billion on the 15 billion or so processed transactions each year. Interestingly, about one in four debit cards in the US are through Bank of America, so they’ll lose about $750 million in revenues, while their new $5/month consumer fee for say, 80% of their 57 million customers (figure, some, but not too many, will balk and give up their debit cards rather than pay the fee) will amount to about $2 billion more than that, making it pretty clear how effective Dodd-Frank is at reining in obscene profits, and providing a glimpse at what the Wall Street protestors might be up in arms about (figuratively, of course– it’s a PEACEFUL protest… the protestors are really no more “up-in-arms” than folks plummeting down a steep dive on a roller coaster).