The part of the legislation causing much angst is the addition of the Durbin Amendment, which goes into effect, Oct. 1.
As a result of the mandate, the debit card will not be very lucrative for banks, since estimates place interchange losses on these cards at about 40 percent
. With the new mandate about to be imposed, banks are actively looking to recoup some of the losses that the new law is projected to cause them to sustain.
In response, a few banks are looking to increase debit card fees as a way to offset the losses incurred because of the fee caps imposed thanks to the passage of Durbin.
Bank of America has joined the ranks of JPMorgan Chase and Wells Fargo by announcing the bank will be looking to impose a $5 monthly fee to some debit card users.
Hugh Son, Bloomberg News, reports
Anne Pace, a Bank of America spokeswoman, said,
“The economics of offering a debit card have changed with recent regulations, and we’ve decided to introduce a monthly fee for customers who use their debit cards for purchases.”
ATM withdrawals will not trigger the $5 monthly fee by the Bank of America, only debit card purchases will generate the charge on [certain] customer monthly statements. While other banks have been 'testing' fees in select markets, the Bank of America's fee is reportedly higher than that of its competitors.
The limits imposed by the new laws were designed to mitigate the interchange fees ['swipe fees'] set by dominating companies Visa and MasterCard. Under the new legislation the amounts merchants have to pay when consumers make credit card transactions for a purchase will shrink. Before the law was changed, business owners could expect to pay on average 44 cents per transaction to their handlers, however once the Durbin Amendment takes effect, this fee will be lowered to 24 cents per transaction for merchants.
According to the Dow Jones Newswires, Bank of America has indicated these restrictions will cause the bank to lose about $2 billion revenue a year, reports the Wall Street Journal
Unfortunately it seems the legislation is now having an anticipated domino effect
on consumers. Initially the assumption was that this law would help consumers, however increased debit fees are perhaps illustrating just how the opposite may occur.
Perhaps the big question is whether consumers are going to be willing to accept the fees in exchange for the privilege to use a debit card? With other payment options available, consumers may turn to other forms of payment, including cash.
Then again, Bank of America customers may decide to forgo the company altogether and transfer their accounts to other banks that are not imposing debit card fees.