Tuesday, November 1, 2011

BofA gets marketplace lashing and lesson

The Observer's editorial for Wednesday's print edition:

What’s that saying about whatever the market will bear? Well, Bank of America, Wells Fargo and other banks got a lesson on that maxim recently – actually a lashing over it.
The marketplace – as in hundreds of thousands of incensed customers – clearly was not willing to bear a charge for using a debit card. So on Tuesday, BofA joined other banks in dropping the idea.

The people spoke and the bank listened. Good. That’s exactly the way the process should work.

As we said last month, we didn’t begrudge BofA’s attempt to recoup profits it was losing due to a swipe fee amendment attached to a federal financial regulation bill last year. That amendment allowed the government to lower the fees banks charge merchants for debit card transactions, which meant that banks would likely pass that loss on to consumers the same way retailers had when they were charged the swipe fees.

That’s what BofA, Wells Fargo and other banks tried to do. It’s what American businesses big and small do each day when confronted with changes to their bottom line. “We have a right to make a profit,” BofA CEO Brian Moynihan said at the time. And so they do.

But as we noted then, customers have rights, too. And when they don’t like the way a business is conducting business they have a right to complain, and even take their business elsewhere. Both of which bank customers across the country did when the debit card fees were unveiled.

Of course, consumer anger against financial institutions was not just about the new fee. The practices of financial institutions were at the heart of the nation’s economic downturn. Some like BofA took federal bailout money – and repaid it with interest. But the public still views them as having profited from the nation’s woes – woes they helped cause – while the average American suffered.

BofA seemed tone deaf about those undercurrents as it pushed its $5 fee. To stoke the anger further, it made a recent poor PR choice when Moynihan lashed out at critics, essentially saying they should be thanking the bank and its employees for what they do rather than “yelling at us.” Is that really a way to win support? Wooing would have been a better strategy.

The bank did finally get the message. David Darnell, co-chief operating officer, said it was cancelling the fee, which would have started in January, after listening “to our customers very closely.”

BofA was also influenced by the fact that the other banks dropped their planned fees. After JPMorgan Chase & Co. and Wells Fargo & Co. decided against similar fees, BofA was the only U.S. bank among the biggest five with plans for one. Citigroup Inc. and U.S. Bancorp had already ditched the idea, and SunTrust Banks Inc. and Regions Financial Corp. eliminated their check-card fees Monday.

Still, consumers should have no illusions that the banks won’t try to find another way to make up that lost income. But the lesson for lenders might be this reminder: As banks are struggling to get back in top shape, so are their customers. Five dollars a month might not sound like a lot, but it’s enough to get some folks fighting mad – and fighting back.

Posted by associate editor Fannie Flono for the Observer editorial board.

Posted by associate editor Fannie Flono on behalf of the Observer editorial board


JWMJR said...

This is a joke right? The entire debit card fee fiasco was nothing more than a convienient distraction from all of BofA's other problems. Primarily their huge derivitives problem. Rather than congratulating them or the press or the public for getting BofA to pull back on a $5.00 a month fee maybe you should be asking about those derivitives.

In light of the MF Global scandel, triggered by over exposure to European soverign debt, Ask BofA what their exposure is and if thats why they moved that xposure onto the backs of FDIC insured accounts and why they have forgotten the meaning of the term "moral hazard." Or maybe ask them just how all the big finacial institutions taking out CDS on each other will work when they start to fold?

Skippy said...

Welcome to the show BoFA now you are as "evil" as big oil thanks to the class welfare propagandists. They need scapegoats to deflect from their failed policies and you are the flavor of the week over $5 a month. Just $5 a month that's all it takes now a day to get the opiated lemmings to scurry to the cliff Meanwhile Duke energy is about ready to have you bend over with a 17% increase on EVERYONE weather you like it or not BECAUSE of President Nitwits energy policies.

Now get your check book out, time to help finance the DNC next year or else our smartest President will continue to vilify you as he continues with his economic wrecking ball policies.

PS the MF Global Scandal is yet another Democrat generated mess, thanks to John Corzine.

Interested said...

It would sure be nice of the Charlotte Destroyer did an article which outlined all of the contributions that BofA has made to Charlotte over just the last two years. They are a major contributor to the arts, schools, community efforts, etc. Additionally the employ a large number of Charlotte employee's (I am not one of them nor do I wish to be.). They have been a good corporate citizen and instead of always tearing them down, once in awhile, let's give them some credit.