CHARLOTTE, N.C. —
Three months after a cap on debit-card fees took effect, it’s becoming clearer how banks intend to recoup future income lost in the Dodd-Frank financial-reform law.
Instead of one new fee, prepare to be sold more products, offered new services, lose rewards and face more fees in general.
Banks’ fourth-quarter earnings provided the first definitive look at what they lost after a cap took effect on the fees merchants pay banks when consumers use their debit cards.
Combined, Bank of America and Wells Fargo reported nearly $800 million in lost swipe-fee revenue in the fourth quarter. Across the industry, banks were on pace to lose the $6 billion that had been predicted.
So with debit-card fees off the table, how will they make it up?
One way is by selling customers more products. Bank of America talks about “deepening relationships” with customers. Wells Fargo is focused on selling existing customers more products.
Midsize banks have been a little more specific in their plans. Regions Financial Inc. has launched new fee-based products such as prepaid cards and changed checking-account requirements so more are carrying fees.
“Fees have gone up across the board in the industry,” said bank analyst Dick Bove of Rochdale Securities.
The cap on swipe fees was touted as a boon to small businesses and consumers. After the cap was adopted as part of the Dodd-Frank Act, the Federal Reserve in June settled on a limit of about 21 cents per transaction, about half what the industry average had been.
As the cap went into effect, several banks’ initial response was to announce plans for monthly fees on debit-card use. Bank of America’s plan for a $5 fee drew the most notice, though Wells Fargo also began testing a $3 monthly fee.
The backlash was swift and severe.
