Fee spree?
With Bank of America Corp. tabling plans to slap a $5 monthly fee on debit-card use, fees remain in the spotlight as banks adjust to a new federal mandate on how they levy these charges.
Smaller banks in particular have been struggling with the additional costs of complying with the mammoth Dodd-Frank financial reform act, according to the Independent Community Bankers of America. The Durbin Amendment of Dodd-Frank limited the amount that banks can charge merchants on transactions involving debit cards ”“ according to the Federal Reserve, used in more than a third of card-based purchases ”“ with banks that have assets under $10 billion exempt from the rules.
On the eve of the Durbin Amendment kicking into effect in October, Bank of America announced a new fee structure for debit-card purchases to widespread protests. Wells Fargo, JPMorgan Chase & Co. and other banks quickly said they would not implement an additional fee on debit-card purchases.
Jamie Dimon, CEO of JPMorgan Chase, said the Durbin Amendment could have an impact on how the New York City-based company expands its Chase retail banks going forward, during an October conference call with investment analysts.
“I think we have built 250 branches this year,” Dimon said. “We look at a lot of business issues. Take branches, for example: With (overdraft fee rules) changing, with Durbin changing, with FDIC charges changing, (at) some branches the margins are no longer great. So we probably will reduce a little bit the branch build-out strategy.”
Jay Forgotson, CEO of BNC Financial Group Inc., said any broad-based fee increases by larger banks could give smaller community banks an opportunity to win some new account holders ”“ if they can keep their own fees in check given their own compliance expenses. BNC subsidiary Bank of New Canaan recently won the top spot in a poll by the Boston-based Commercial Record rating the best providers of products and services among Connecticut community banks.
“Generally speaking, our goal and mission is to deliver services to regular people in the community at prices that are favorable,” Forgotson said.
People”™s United Financial Inc. CEO Jack Barnes said his bank has been readying for the new rules for the past year ”“ and that it might be able to offset any impact of Durbin, without tipping his hand as to how.
“What we”™ve been doing really for the last 12 months, as the Durbin issue became an approaching reality, is that we”™ve been working (on) a broad strategy to try to look at a variety of ways that we could offset the loss of that fee income within our business,” Barnes said, in a conference call last month with investment analysts. “Our strategy has been to look at the existing fee structure and make changes where appropriate (and) look at minimum balances and other pieces of our packages. And we have over time taken a variety of steps that are helping us offset the impact, and we are going to continue to work that as we move forward.”