This is my Sunday column
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Taking its cue from the right-wing Heritage Foundation, the Romeo Area Tea Party has labeled Bank of America’s new $5 monthly fee on debit cards a federal “tax” created by Congress.
Seriously, the RATP and many other tea party groups across the nation have actually bought into the idea that Bank of America, perhaps one of the nation’s least admirable corporations, has been forced by federal regulations to create a new fee that will help keep them in business. And that fee, therefore, is a tax born in Washington.
At issue is the legislative solution to the 2008 bank meltdown that nearly destroyed the U.S. economy. Within that Dodd-Frank bill — named after its key congressional sponsors — is a provision that says the sky-high fees charged by mega-banks for debit card use must be reined in. The limit was set at 24 cents per transaction.
Critics say that limit amounts to price-fixing by the government.
Federal investigators have found that a bank’s cost for processing a customer’s debit card transaction averages about seven to 10 cents. But retailers and merchants were being charged about 44 cents for each card swipe. That’s a profit ranging from 340 percent to 530 percent.
If you read the fine print in this political debate, that gluttonous windfall by a “too big to fail” bank is what conservatives are defending.
Bank of America responded to the swipe fee limit by breaking new ground, creating a $5 monthly fee on debit cards whether a customer uses the card within a given month or not. Other big banks hailed the BofA move and suggested they will follow suit.
Across America — the real America — the reaction was quite different. The move was considered a major blunder. Consumers took to the blogosphere in droves to vent their displeasure, and the bank’s already-battered stock dropped by more than 3.5 percent one day later.
The conservatives who stand with BofA look increasingly out of touch. They try to tie opposition to the new debit card fee with the odd combination of lefties protesting on Wall Street. But the reality is far more typical of grassroots politics.
A petition that aims to get BofA to reverse its decision on the $5 fee quickly gathered 205,000 signatures. Molly Katchpole, a struggling young worker, turned the petition in to the bank on Friday and promptly closed her account.
“Not everyone will pay the fee (at least not at first),” writes Katchpole on the petition page. “If you have $20,000 in combined balances of BofA accounts or have a mortgage with the bank, they’ll waive the $5 monthly fee.
“That means this change will hit low-income customers the worst — including people like me, a recent college graduate working two part-time jobs,” Katchpole writes.
Financial analysts note that BofA is a company with a history of hitting credit-worthy customers with huge fee increases on credit cards — without notice or explanation. So, it’s no surprise that in recent days some reports indicate that the mega-bank will also boost fees by $9 a month on some checking accounts.
According to estimates, BofA generated $2 billion a year in profits under the old debit card system. With the $5 fee, those profits will jump by 13 percent and could grow to $3 billion.
All of this from a bank that took nearly $100 billion in federal bailout money, paid no corporate taxes in 2010, and then used all that political clout to post record quarterly net profits.
Yet, one of the most organized and effective tea party organizations in Michigan — and many other tea party groups nationwide — have bought into the idea that Bank of America’s fee was forced upon the company by Congress and should be labeled a new federal burden on taxpayers.
Meanwhile, many small and medium-sized banks charge no fees on debit cards or checking accounts. Unlike BofA, one bank executive said, his bank demonstrates “sensitivity” to their customers’ need.
In other words, BofA and the Wall Street banks are Too Big To Care.
