A Lesson in Unnecessary Regulation

[badlydrawnjeff.livejournal.com]

By now, you've probably heard about Bank of America's plan to begin charging $5/month on the customer side for debit card usage. What you probably haven't heard of is why:

NEW YORK (Dow Jones)--Bank of America Corp. (BAC), the largest U.S. bank by assets, plans to charge customers a $5 monthly fee for making debit card purchases starting early next year, according to an internal memo sent to bank executives Thursday.

...

Bank of America is trying to cushion revenue losses it expects to incur from new caps on the fees merchants pay when a customer uses a debit card at their stores. In June, the Federal Reserve Board finalized rules capping such fees at 24 cents per transaction, compared with a current average of 44 cents.

...

Other banks have introduced or are testing new fees in response to the debit fee caps, which stem from a provision known as the Durbin amendment in last year's Dodd-Frank financial regulation overhaul legislation.

This follows many banks ending free checking in large part to the regulations in the Dodd-Frank bill limiting debit overdraft fees. This will likely not be the last time we see banks making more adjustments, either.

Regulations matter. The negative impact of regulatory action when it's not needed only ends up hurting the rest of us in the long run. In a misguided rush by the left to "protect" the population from evil, predatory banks, all you've done is now made it harder for those who you profess to represent and care about the most to use banking services. Congratulations on another job well done.

Comments

[fizzyland.livejournal.com]

Your cynicism aside, there's nothing surprising that the banks would work to make up revenue lost in one area.

[telemann.livejournal.com]

Yes, the "Walking into our branch fee." The "You made me look up your balance fee."

[badlydrawnjeff.livejournal.com]

Absolutely. Yet it appears to have been a surprise to those in favor of the regulation (http://www.foxnews.com/politics/2011/09/30/durbin-slams-bailed-out-bank-america-over-new-debit-fee/)...

[rick-day.livejournal.com]

FEE MARKET, YO

[paedraggaidin.livejournal.com]

Eh...it's all a balancing act. I think specific regulations have little net impact. Reg 1 limits Fee X, so bank increases Service Charge Y; Reg 2 limits Service Charge Y, so bank increases Fee Z, and so on, and so forth.

Regulate everything, and banking stops working. Regulate nothing, and consumers are screwed left and right. There's a balance to be found somewhere between the two.

[telemann.livejournal.com]

Yeah exactly. I'm sure merchants pass the transaction fee along to their customers anyway. AND the original plan was to reduce the fee to .12 cents. The banks whined so much about it, they got double what they were originally going to get. Besides, it was banks that were pushing for all this debit card stuff years ago, and everyone thought it was going to be completely free. Haha! They sure fooled us!

[reflaxion.livejournal.com]

How is lowering merchant fees on debit card transactions "protecting the population" at all?

[bikinisquad3000.livejournal.com]

Well, it certainly helps small business owners out.

[soliloquy76.livejournal.com]

I knew this post was coming, and I'm not surrprised it was from you.

The overdraft section of Dodd-Frank isn't the key here. It's per-swipe fees that were being charged to businesses. Dodd-Frank put a cap on that, so banks are getting up to 50% less in swipe fees. Some businesses were being charged up to 44 cents per swipe. That adds up.

The overdraft protections are a good thing, too. Banks were charging outrageous fees for even the smallest of overdrafts.

I think consumers and businesses that know what Dodd-Frank does for them will be fine with it. And banks will find that they're going to lose a lot of customers to credit unions and banks who don't charge fees. That's how the market works, right?

Personally, I'm still at BoA and will be moving to a local credit union. BoA was shit before this announcement, and this is the last straw. Fuck them.

[paedraggaidin.livejournal.com]

Yeah, this. I had an awful experience with my old bank before I moved to a credit union, and I've never looked back.

[bikinisquad3000.livejournal.com]

So out of the three groups involved here—customers, business large and small, and the largest U.S. bank by assets—the bank is the one that simply cannot absorb the loss of this income? I mean, I understand how heartbreaking it is that they might not make the 3.2 billion dollars in profit they made in 2010, or the two billion in profit they've made so far this year, but give me a fucking break. Unless I see compelling evidence that they had no choice but to try to make up the difference, I'm going to have to go ahead and assume that this is just more of the same short-sighted greed that requires regulations like this in the first place.

[soliloquy76.livejournal.com]

Meanwhile, they were bailed out with taxpayer money, and their board doesn't seem to be considering salary cuts. Their CEO's salary is nearly $1 million with $9 million in stock for 2011.

[404.livejournal.com]

Why does it cost so much for businesses to begin with? Or better yet, why do banks charge so much per swipe? 22 cents isn't enough?

[soliloquy76.livejournal.com]

Even worse, assholes like me use their debit card for everything now, even a 5 dollar sub at Subway™. So vendors were getting shafted with 44 cent fees for that, as well as for major purchases like electronics. I read somewhere that the actual cost per transaction is 4 cents. So 44 cents was gouging in the truest sense of the word.

[meus-ovatio.livejournal.com]

So basically banks are mindless automatons doing what they do according to Rules of Nature, but stupid Government isn't, and has a choice, and so Government, being the only cogent agent of action, should work to herd banks along like the idiotic drones they are? I don't like this imbalance of agency.

You can't wish away economic reality but you can shift costs.

[montecristo.livejournal.com]

Firms charge precisely no less, and no more, than what the market will bear, or else they fail to maximize profit. Government is force. It's edicts are based upon the whims of politicians and upon perception and what can be gotten away with, politically. Government is all about imposing externalities and shifting costs from some people onto the backs of others involuntarilly.

[rick-day.livejournal.com]

Your welcome.

I worked hard with The Congress to implement that regulation and I don't even use a debit card.

[badlydrawnjeff.livejournal.com]

That's unfortunate.

[devil-ad-vocate.livejournal.com]

The customers will ultimately decide if BofA made a good decision.

[montecristo.livejournal.com]

Unfortunately, given the ignorance of economics in this country, they probably won't decide intelligently if the regulators have made good decisions.

Note to the economically ignorant:

[montecristo.livejournal.com]

No, Virginia it is not Mean People™ causing everyone to pay more. Companies charge people what the market will bear for goods and services. Some of the comments made on this post...sheesh. The ignorance is severe, and they vote.

Re: Note to the economically ignorant:

[kylinrouge.livejournal.com]

Companies charge people what the market will bear for goods and services.

This is code for 'as much as they possibly can without losing customers,' which in this case will actually lose them customers. So they're not really following your sage financial advice.

[foreverbeach.livejournal.com]

Regulations do matter, but BOA is also one of the most obscenely fraudulent, crooked institutions in the world. They pull some of the most unethical bullshit around, and if they weren't considered too big to fail, they could have been sued out of business already. Fuck them.

[malakh-abaddon.livejournal.com]

Second to Bankers Bandits & Thieves (BB&T), AmeriBank, or First National Bank of Keystone (see Terry Church of Northfork, WV.)...

[ytterbius.livejournal.com]

Well, then people will leave that bank, which is just trying to make extra money off of the process of people spending their own money, and banks that want to have those accounts without the fees will win.

[malakh-abaddon.livejournal.com]

So their profit is down. Oh the boogyman of regulation is creeping into the closets of the people who run these banks, and is going to steal their pillow. Oh I feel so sorry for them, I mean god forbid that their profit isn't however many hundreds of millions of dollars a year, because they can't charge all these fees.

Look, I am all for responsibility, but one bank I dealt with, we will call it Patriot Bank, would bust you if you overdrew your account. That was fine, except they would bounce a check if it was one red penny over what you had, fine you $35, take the money out of your account paying what was over drafted, and taking the $35, out of the account incurring another $35 fee. Grand total for one bad check was $70. One other trick this bank pulled, and I know many banks will do this, they would debit your account before crediting a deposit, lots of overdraft fees in doing that. Good luck if it was an error on their part, you still had the privilege of paying those fees.

[meus-ovatio.livejournal.com]

Yeah, it's pretty much SOP for banks to line up your withdrawals by size and time first in the order, then do the deposits.

[blueduck37.livejournal.com]

So the banks can't gouge businesses anymore on debit card use, so they'll use gouge their customers instead.

Only you could look at that and feel sorry for the bank.

[stewstewstewdio.livejournal.com]

The negative impact of regulatory action when it's not needed only ends up hurting the rest of us in the long run.

Oh, no!! Rampant transparancy!! Bank customers able to make conscious decisions about the banking fees!! Oh, the horror!! When will it all end?

All this is doing is offsetting under the table fees that banks used to charge that were buried in their contracts. Which, by the way, were subject ot being changed without notice due to a clause in the contract.

[peristaltor.livejournal.com]

Unless, like me and my friends, you actually read the contract and call them on their bullshit. It's amazing how fast they back-pedal when you say those magic words: "Well, I guess I have no recourse but to cancel my account."

". . . Just a minute. I'm checking with my manager," is what I usually hear.

[mylaptopisevil.livejournal.com]

If only I didn't create a speed limit, then Timmy wouldn't have bludgeoned that seal to death!

WHAT I FOOL I WAS! THAT SEAL'S DEATH IS ON MY HANDS!

[meus-ovatio.livejournal.com]

Bad government is a reason to get rid of government. Bad business is just, well, you know, the point.

error 404

[enders-shadow.livejournal.com]

109 comments so far, without mine: does anybody in this comm agree with you? even the other conservatives here don't feel like the BoA is justified in this bullshit.

consider this jeff: nobody else here thinks this is a big deal.

it's not a shock that a corporation is looking for another way to make a profit: it's simply sad how blatant they are being in anally fucking over their customers.

i'm with TD bank; they don't have half the bullshit american banks do. Go Canada!

Re: error 404

[badlydrawnjeff.livejournal.com]

consider this jeff: nobody else here thinks this is a big deal.

I've said it before, I'll say it again - I'd rather be right than popular.

i'm with TD bank; they don't have half the bullshit american banks do. Go Canada!

They're my bank, too. Definitely hoping they don't go along with this nonsense.

[whoasksfinds.livejournal.com]

the law of unintended consequences. "protecting the consumer" becomes an increase in consumer debt. thanks uncle govy!

[ledzilla.livejournal.com]

I would not use a debit card if you paid me.

[kylinrouge.livejournal.com]

I'm not sure how government forced banks to gouge more money out of people. Seems like they decided to do that all on their own.

[badlydrawnjeff.livejournal.com]

In this case, the market spoke. BoA clearly saw that the costs of implementing this were higher than the costs of not implementing it. Markets win again!