BofA cancels plans for $5 a month debit-card fee


Bank of America abandoned plans to charge customers $5 a month to use their debit cards, marking a high-profile retreat for a fee that became emblematic of the current populist outrage against Wall Street.

The nation’s second-largest bank was broadsided by customer protests — and even criticism from President Obama — after announcing the charge in September. BofA’s position was further weakened as rivals including JPMorgan Chase & Co. and Wells Fargo & Co. declared they would not impose similar fees.

The uproar against BofA illustrates the deep-seated anger and resentment many Americans feel over the sagging economy. For many, the fee became a rally cry for consumer anger at the banking industry.


“It was a reality smack in the head for these companies,” said Nancy Bush, an analyst at SNL Financial. “And in my view it was much needed.”

The fee was proposed in response to the Dodd-Frank Consumer Protection Act, which mandated more transparent bank charges and reduced some rich streams of fees. Analysts estimated that Bank of America’s debit-card fee, which it had hoped to impose next year, would have raised between $500 million and $1.4 billion annually from its 38 million non-business customers.

Bank of America Chief Executive Brian T. Moynihan defended the company’s plans last month, saying that customers and shareholders understand the bank has a “right to make a profit.” But the proposed fee touched a nerve among customers who rely on debit cards to pay for groceries at the checkout stand and gasoline at the pump.

The bank’s actions fueled demonstrations in front of branches and corporate offices. It even prompted a Washington customer, Molly Katchpole, to collect 300,000 signatures on a website she set up to urge the bank to change course, and sparked a movement called “Bank Transfer Day” calling on customers to close their accounts at big banks by Saturday.

The bank shelved the plan.

“We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” David Darnell, co-chief operating officer at Bank of America, said in a statement. “As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”

The bank declined to comment further or say how it would make up for the lost revenue. BofA shares dived 6.3% to $6.40.


Analysts contend Bank of America and other major U.S. financial companies will be forced to raise other fees, such as by eliminating free checking accounts, or make up the difference with cost cutting.

“This is not the end of new fees,” said Bill Hardekopf, chief executive of, a website that tracks card offers. “Banks may increase existing fees or raise the introductory interest rates on credit cards. They will find some way to increase their revenue, and it’s always the consumer that will end up paying.”

Bank of America had proposed to charge customers $5 for any month that they used their debit cards for purchases, although transactions at BofA ATMs would have remained free.

JPMorgan Chase and Wells Fargo already had announced pilot programs to test $3 fees for debit-card users in a few states, and southern regional giants SunTrust Bank and Regions Financial had fully phased in monthly debit fees of $5 and $4, respectively.

But when Wells and Chase took the no-debit-fee pledge Friday, and SunTrust and Regions canceled their fees Monday, Bank of America was forced to follow suit, citing “customer concerns and the changing competitive marketplace.”

“There’s still a large power differential, but I think consumers should realize they can move the marketplace when they send a very clear message about what needs to change,” said Norma Garcia, a senior attorney for Consumers Union.


Garcia said that in her 19 years on the job, she’d never previously seen banks make such a shift unless required to do so by Congress or regulators. She and others warned, though, that banks might look for other ways to raise the cost of services.

It is too soon to tell whether the bank imposing and then backing off the fee plans will have a lasting public-relations effect. That is just one of a number of problems facing the beleaguered bank, which needed two infusions of government funds to stay in business at the height of the financial crisis.

Bank of America still faces billions of dollars in costs to settle a host of mortgage-related lawsuits, claims and investigations, including a probe of foreclosure practices at it and other big banks by a coalition of state attorneys general and federal agencies.

What’s more, BofA last month relinquished its title as the nation’s biggest bank by assets to JPMorgan Chase, which CEO Moynihan said is part of a strategy to shrink the company to focus on its most profitable customers. Pressured by regulators to raise capital and by Wall Street to increase profit, the company is already in the midst of cutting about 30,000 jobs to reduce expenses.

On a broader level for the banking industry, the decision by major U.S. banks to not impose the debit-card fee was seen as a benefit of Dodd-Frank. The law seeks to make bank charges easier for consumers to see and evaluate, and help foster competition among banks.

“For years the big banks have been rigging the rules with a lot of fees and charges we were not aware of,” said Sen. Dick Durbin (D-Ill.), who pushed for the limit on debit-card fees charged to merchants. “Through a combination of reasonable regulation and consumers voting with their feet, we are bringing transparency and competition back to the financial services industry.”


Obama and Vice President Joe Biden had been among the critics of the fee. White House Press Secretary Jay Carney said Tuesday that “it certainly stands to reason that consumers did not react well to it” and touted the financial reform law for enabling people to “see more clearly what they’re paying for.”

At least one politician called out the Occupy Wall Street movement by name as one reason BofA opted against going through with the fee. The protesters camped out in Los Angeles, New York and other major cities staged demonstrations outside some bank headquarters and even the residences of their CEOs.

“You had consumer reaction, the Occupy Wall Street protesters and congressional scrutiny,” said Rep. Peter Welch (D-Vt.), “and obviously Bank of America decided the wiser course was finally to do the right thing.”

Times staff writer Jim Puzzanghera contributed to this story from Washington.