Banking Industry Wrong About Impact Of Durbin Amendment

Financial industry experts and three separate government agencies have confirmed that small banks and credit unions have benefitted from debit reform, putting to rest the banking lobby's negative and false claims about the impact of the Durbin Amendment.

Studies by the Federal Reserve, the Federal Reserve of Kansas City, the Federal Trade Commission and the Government Accountability Office have shown that fee revenues for banks exempted from the interchange fee limits have remained unaffected or have even grown thanks to the two-tier fee system mandated by debit reform for exempt and non-exempt banks.

As a result of the reform, small institutions can now compete with large banks and have attracted new customers with improved customer service and offerings.

For more information read the Merchants Payments Coalitions’ latest fact sheet: The Verdict Is In:  Small Banks Win With Debit Reform

Customer Dissatisfaction With Banks On The Rise

Americans don’t trust financial institutions even when it comes to their own banks and judging by the enormous amounts financial industry spends on public image campaigns and advertising, banks are well aware that their consumers are getting fed up with lack of transparency, high and unfair fees and poor customer service.

Doug Kantor, counsel to the Merchants Payments Coalition says:

“The big banks’ multi-billion dollar campaigns aren’t moving the needle on the favorability meter because they continue to stick consumers and Main Street businesses with unfair, hidden fees. With good reason, Americans still do not trust big banks”

The MPC has put together results of a few surveys that looked into Americans’ perception of banks. Findings show:

• 64% say they do not fully trust big banks.
• 87% do not feel their bank is transparent
• 68% do not perceive their bank as being “on their side
• 30% say they are sometimes surprised by unexpected bank fees
• 31% claim their bank’s fees are simply unfair
• Americans’ confidence in U.S. banks is at a record-low 21%, down from 23% in 2010.

Passing the costs onto the customer in the form of high fees is a sure way to drive them away. ATM fees, checking fees, debit and credit card fees, swipe fees are all on the rise with swipe fees being eight times higher in U.S. than Europe. No wonder Americans are not happy.

BoA's Recent Move Proves Durbin Amendment A Success

The Durbin Amendment forced big banks to lower their swipe fees on debit cards and gave smaller banks a chance to compete with the financial giants. Bank of America’s recent cancellation of plans to charge for checking only proves debit reform is working.

Banks have been blaming the Durbin Amendment for everything wrong with the world, but as Doug Kantor, counsel to the Merchants Payments Coalition, wrote in a Huffington Post blog, debit reform has brought greater competition among banks to the marketplace.

 “The truth is, checking fees are set by competitive market dynamics, while swipe fees on debit cards haven't been. The fees were decided by Visa and MasterCard and every bank that belonged to one or the other charged the same thing - that looks just like price-fixing in every other part of the economy. The fact that swipe fees tripled over the past decade didn't prevent banks from increasing checking fees at the same time. Fluctuations in checking fees and other banking fees since debit reform are fundamentally the same as what was happening in the consumer banking market before the reforms were enacted with checking fees going up at the same or a lesser rate.”

In other words, debit reform forced big banks to compete for customers. The rest of Kantor's article can be found here.

A Roundup of Credit Card Ripoffs

Major banks and credit card companies have been caught red-handed misleading their customers with deceptive credit and debit card fees. The Consumer Financial Protection Bureau, agency established last year to protect consumers from unfair and abusive practices of financial institutions, ordered Bank of America, American Express, Capital One and Discover to refund $425 million to their customers.

Sacramento Bee personal finance columnist Claudia Buck lists a few of credit card fee scams used to rip-off consumers:

• “Bank of America routinely processed debit transactions in order of highest to lowest amounts. Instead of debiting them chronologically in the order they occurred, the bank started with the highest amount - say a $1,000 rent payment. If that exceeded what was in the person's bank account, then every subsequent debit charge racked up overdraft fees, which typically are $35 per transaction. As a result, some consumers got dinged thousands in overdraft fees.”       

•  “American Express: Three AmEx subsidiaries were ordered to pay $85 million to about 250,000 cardholders for various illegal credit card practices between 2003 and spring 2012. The violations "occurred at every stage of the consumer experience, from shopping for cards, to applying for cards, to paying charges, and to paying off debt, " said the CFPB." 

•  “Capital One's call centers targeted consumers with low credit scores. When those customers called to activate their credit cards, "high-pressure" salespeople were misleading about the cost, eligibility and benefits of various products, such as job-loss "payment protection" or credit score monitoring.” 

 You can read Claudia Buck’s article here.