By Richard Burnett, The Orlando Sentinel –
ORLANDO, Fla. — If you thought customers triumphed last fall when the nation’s big banks quickly retreated from monthly fees for debit-card use, think again: Like the mythical Hydra, banks have replaced that charge, severed by a grass-roots uprising, with various new fees designed to recoup lost income.
Although some of these fees appeared before last year’s debit-card revolt, many more are making their debuts this year. There are nearly 50 different fees consumers can wind up paying, depending on the services they use and how they use them, according to some consumer advocates’ latest estimates.
“Most of these fees are not the in-your-face charges, such as the debit-card fee that caused the big uproar,” said Alex Matjanec, co-founder of MyBankTracker.com, a consumer-finance information website. “Many are flying under the radar. But they could have a big long-term effect on your money if you aren’t paying attention.”
Some banks have started charging for wire transfers, paper statements, prepaid cards, debit-card replacement and other services. Some even charge you now for closing an account or for making deposits using an iPhone. Don’t be surprised if some banks eventually charge people just to apply for a loan, consumer advocates say.
Banks are combining the new fees with increases in existing fees in an effort to make up for billions of dollars in revenue whose loss they blame on the federal financial-services overhaul, spiraling regulatory costs and huge legal liabilities such as the recent $25 billion foreclosure-fraud lawsuit settlement.
For example, there has been a resurgence in overdraft and credit-card fees, both of which had dipped across the industry as a result of changes that took effect in 2009 and 2010.
“The banks have done a good job of convincing consumers that they just can’t live without those (overdraft) services,” said Gerri Detweiler, a Sarasota, Fla.-based personal-finance expert for Credit.com, an independent consumer-finance research service.
Banks say they still provide customers multiple ways to avoid the vast majority of service fees, including the new ones. More than half of all U.S. bank customers pay no fees at all by maintaining minimum account balances, setting up direct deposits or signing up for other services linked to their accounts, according to a 2011 study by the American Bankers Association.
Still, the fee issue has reached a tipping point for some consumers.
Chris Erwin of Orlando said he closed his bank account at Wells Fargo & Co. last fall during the uproar over monthly fees for debit-card use. He also cited the Occupy Wall Street protest movement, which focused much of its energy on big banks.
“The Occupy movement kind of made me realize these big banks act more like investment banks, and you don’t really know what they are using your money for,” said Erwin, a 24-year-old home-security supervisor who has opened a member account at the Lake Mary, Fla.-based CFE Federal Credit Union. “It just seemed a much fairer thing to do, to go to a not-for-profit-type bank.”
According to a recent survey by Javelin Strategy and Research, more than 5.6 million consumers switched banks during the fourth quarter of 2011, including many who moved to credit unions or smaller community banks, both of which typically charge lower fees. The survey by the California-based financial-consulting company estimated that 610,000, or 11 percent of the total, did so as part of the grass-roots protest against big banks’ attempt to impose debit-card fees, while an additional 846,000, or 15 percent, changed because of objections to bank fees generally.
A half-dozen large banks either imposed or announced plans last year to impose $5 monthly fees on customers who used their debit cards to buy goods and services; ATM use was exempt from the fee. The banks’ actions stoked public anger still simmering from the federal government’s 2008 bailout of major U.S. banks, and an anti-fee petition on Change.org, a grass-roots-organizing site, drew more than 300,000 signatures. By early November, all of the banks had backed off their debit-card fees.
Banks argue that surveys such as Javelin’s don’t tell the whole story. Such studies neglect to report, for example, how many new accounts were opened at major financial institutions during the same time period.
Increases in the number and size of consumer fees, they say, are the inevitable result of what they describe as government overregulation of their industry: Caps on fees charged to merchants, additional disclosure mandates and other financial-service changes have limited their revenue and boosted their costs.
They criticize federal changes such as the 2011 Durbin Amendment, which set a 21-cent cap on the debit-transaction fees that banks charge retailers and other businesses that accept such cards from their customers. That cap cut in half the average “swipe fee” banks had been charging for processing those transactions. Congress, in capping those fees, had sided with retailers who argued that the transaction charges were monopolistic and far out of line with banks’ actual costs — an assertion banks dispute.
“Congress has to understand that, whenever you pass legislation such as the Durbin Amendment, all of us as consumers are going to pay for it,” said Alex Sanchez, chief executive officer of the Florida Bankers Association. “The more regulations you pass on the banks, the more those costs are passed on to the people on Main Street.”