By Vicki Needham - 11/01/11 09:43 PM EDT
Opponents of a recent spate of proposed debit-card fees hailed the decision of banks to drop their pursuit of new revenue.
Customer angst led Bank of America on Tuesday to scrub plans for a monthly $5 debit card fee following the moves by several other major banks, including Chase and Wells Fargo, to forego the additional fee. Atlanta-based SunTrust and Regions Bank said Monday they also would scrap their plans.
“This decision proves that a free and open marketplace based on transparency and competition works," said Mallory Duncan, senior vice president and general counsel for the National Retail Federation.
The NRF lobbied heavily to reduce swipe fees on debit-card use, a charge led by Sen. Dick Durbin (D-Ill.) in Congress.
The reversal of policy by banks provides another victory for those such as Durbin pressing banks to reduce fees on businesses and customers, especially in the light of rising profits.
Banks said they were instituting the debit card fees as a way to make up revenue lost to the so-called “Durbin amendment,” a provision within the Dodd-Frank financial reform law implemented Oct. 1 that cut swipe fees from an average of 44 cents per transaction to 24 cents.
After the law went into effect, banks began announcing they were testing $3 to $5 monthly fees even though most were reporting profits.
"Through a combination of reasonable regulation and consumers voting with their feet, we are bringing transparency and competition back to the financial services industry," Durbin said on the Senate floor on Tuesday.
"It is working and it's long overdue," he said. "Consumers are now saying they'll only do business with banks that care about serving them instead of squeezing them."
Credit unions and community banks have stepped up their efforts to get customers to switch banks with a campaign called “Bank Transfer Day” set for Saturday.
Durbin said he had heard that activity on credit union websites is up 800 percent.
Rep. Peter Welch (D-Vt.), who led the charge in the House against the fees, called the decision “an enormous win for consumers.”
“Bank of America and other large banks got caught with their hands in yet another pocket of their customers,” he said. “This time, however, they overreached.”
On Oct. 13, Welch called on Attorney General Eric Holder to investigate whether Bank of America and other banks had violated federal antitrust laws by imposing the new fees.