Bank of America (BofA) officials including its CEO, Brian Moynihan, are lobbying in Washington to ensure that the bank is not forced to withdraw its $5-a-month fee for debit card users.
The bank’s decision to impose this fee has received negative publicity and drawn flak from senators and consumer groups. In fact, bank officials suspect that the newly set up Consumer Protection Bureau might move to compel the bank to withdraw the fee. Many people though say this is not right since if customers do not like this, they can just switch banks. It is also no different than the federal government’s high gas tax that everyone pays all the way to income to sales tax that some or all Americans face, respectively. So bank officials have moved to pre-empt the Bureau by meeting with its officials to explain the rationale for the new fee.
Consumer Protection Bureau
The Bureau is a new federal agency that has been mandated by the Dodd-Frank financial reform law to monitor and regulate banks’ activities in relation to their customers. Bank of America officials say they have been forced to impose the new fee to at least partially make up for revenues lost because of the new law. Other banks too have claimed that the Dodd-Frank legislation is responsible for new costs that have to be passed on to customers in the form of fees. The Dodd-Frank bill, just like Sarbanes-Oxley, has been credited with forcing more jobs to move overseas and companies to hire less. Both are reasons why the unemployment rate is so high in America.
Moynihan, who became Bank of America’s CEO in early 2010, has been under intense pressure from shareholders to cut costs and raise capital even as shares now trade at around $5. According to sources in Congress, bank officials are due to meet officials from the Federal Reserve to discuss Moynihan’s plans to sell assets to raise capital.
The negative publicity over the debit card fee is not the first issue to hit the bank in recent times. Many investors and analysts are worried about the possibility of the bank facing litigation over the dealings of its Countrywide Financial unit. It is believed that this unit might have sold fraudulent mortgages that the bank would now have to pay for. BofA should have never have bought this company, they did not want to, but capitulated to the pressure of Washington. They should have fought this unwelcoming insinuation and used the media to inform the public about government stepping out its bounds.
Meanwhile, BofA officials are working to ensure that the bank will not have to withdraw the debit card user fee. Officials fear that if the White House applies sufficient pressure they might have to do just that; just like they did with the Countrywide Fiasco which was just mentioned.
While the Consumer Protection Bureau and its head, Raj Date, have no plans at present to force the bank to withdraw the fee, they do want an explanation for it.
A few politicians too have called for a withdrawal of the fee, with Dirk Durbin, the Illinois Congressman, even asking customers to withdraw their bank deposits from Bank of America as a mark of protest. Both the President, Obama, and the Vice President, Biden, have criticized the fee. They have that right, to invoke their opinion, just like Americans can criticize the complicated tax code and the high taxes imposed by those very same people.
With Bank of America feeling the heat from numerous directions, it is only to be expected that its executives have begun intensive lobbying in Washington to deflect some of the ire. Bank of America officials are in touch with the Consumer Protection Bureau as well as many members of Congress to ensure that their reasons for levying the fee are understood and accepted.
As many politicians and consumer groups are of the opinion that the bank’s move will badly hit customers already hit hard by recent economic events. This concern and the public outcry against the fee has been a public relations mess for the bank. Moynihan has had to move fast to contain the damage without withdrawing the fee.
The nation’s biggest bank and its CEO need to get the politicians and the public behind it and convince them of the need for the fee. The bank will also need to convince the Consumer Protection Bureau to let it impose the fee. While the bureau has broad powers, these have yet to be tested. This controversy over the fee will be a test for not just BofA but the newly constituted Bureau.