If you only read Thursday's coverage of Bank of America's decision to impose a $5 monthly debit card fee by Associated Press Personal Finance Writer Candice Choi, you would have no idea that last year's "Dodd–Frank Wall Street Reform and Consumer Protection Act" triggered BofA's decision. The legislation gave the Federal Reserve the power to limit debit card interchange fees. The Fed's limit -- 21 cents plus 0.5% of each purchase transaction -- basically cut the banks' fees by about half from their pre-Dodd-Frank level. CardHub.com estimates that the cap will reduce banks' fee income by $9.4 billion annually.
Ms. Choi only cited the existence of "a new rule" in her opening paragraph. She then waited until the ninth paragraph to vaguely cite the existence of "a regulation." It hardly seems accidental that most news consumers who didn't follow the fee fight a year ago will probably have the impression that banks are driving the fee increases, as the following excerpt will demonstrate (bolds are mine):
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More bad news for bank customers: Debit card fees
Bank of America will start charging debit-card users $5 a month to pay for purchases. The move comes as the cards increasingly replace cash and as banks look for ways to offset the loss of revenue from a new rule that will limit how much they can collect from merchants.
Paying to use a debit card was unheard of before this year and is still a novel concept for many consumers. But several banks have recently introduced or started testing debit card fees. That's in addition to the spate of other unwelcome changes checking account customers have seen in the past year. Bank of America will begin charging the fee early next year.
... Customers will only be charged the fee if they use their debit cards for purchases in any given month, said Anne Pace, a Bank of America spokeswoman. Those who only use their cards at ATMs won't have to pay.
The debit card fee is just the latest twist in the rapidly evolving market for checking accounts.
A study by Bankrate.com this week found that just 45 percent of checking accounts are now free with no strings attached, down from 65 percent last year and 76 percent in 2009.
... The changes come ahead of a regulation that goes into effect next month.
Starting Oct. 1, the regulation will cap the fees that banks can collect from merchants whenever customers swipe their debit cards.
... There is no similar cap on the merchant fees that banks can collect when customers use their credit cards, however. That means many banks are increasingly encouraging customers to reach for their credit cards, in hopes of reversing a trend toward debit card usage in the past several years.
Ms. Choi never identified what law drove the need for the fee (Dodd-Frank), who championed it (President Barack Obama), who passed the law (the Democratic Congress led by House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid), which Senator pushed for the fee cap (Illinois Democrat Dick Durbin, who of course is claiming the new fees aren't his fault), or who issued the rule (the Fed).
There's room for discussion as to whether capping merchant fees for debit-card transactions has merit. But there's no good excuse for Ms. Choi's failure to report how the cap came about and who's responsible. I suppose she may claim that she's "only" a personal finance writer and not a political reporter, but that doesn't cut it. As written, it could have been the American Bankers Association and not the federal government which imposed the rule. Choi's writeup enables those who passed the legislation and issued the rule to partially avoid accountability for what they've done, and would seem to betray a belief on her part that readers would not be pleased with them if they knew.
Free checking is starting to disappear, and fee fever is growing. Why it's happening -- because of so-called "consumer" legislation -- is news, Candice.
Cross-posted at BizzyBlog.com.