Bank of America was left increasingly isolated Monday in its controversial plan to charge its customers a monthly fee for using their debit cards.
SunTrust Bank Inc. and Regions Financial Corp. became two of the last remaining holdouts to eliminate debit fees, telling consumers they would discontinue their monthly fees and refund customers who had already started paying to use their cards.
“We have heard from our customers and are responding to their feedback by eliminating the monthly fee for (debit cards),” John Owen, head of Consumer Services for Birmingham, Ala., -based Regions Bank, said in a statement.
Owen assured the bank’s customers they would receive their refunds by Friday.
Brad Dinsmore, Consumer Banking and Private Wealth Management executive with Atlanta-based SunTrust, said clients would receive their refund in the next 30 days.
Dinsmore said SunTrust believes “banking is a relationship business,” and after hearing from their customers the bank will provide “the convenience and security of check cards at no additional charge as part of all of our checking accounts.”
The banks followed larger rivals JP Morgan Chase and Wells Fargo & Co., which both canceled tests of similar fees. Wells Fargo had been testing a $3 monthly fee in Nevada and four other states since Oct. 14.
A Wells Fargo spokeswoman was unavailable for comment Monday.
The banks’ decision to end debit card fees leaves Bank of America alone in maintaining its controversial fees. The bank announced it plans to charge customers $5 per month in 2012, in response to new federal rules that cap debit card interchange fees.
Consumers angered by Bank of America’s decision, helped fuel a movement that encourages consumers to switch to credit unions and community banks that don’t charge such fees.
“People are literally walking into branches and cutting up their Bank of America cards,” Kirk Kordeleski, CEO of Bethpage Federal Credit Union in Long Island, N.Y., said last week.
The retail banking arm of JPMorgan Chase & Co. will stop charging $3-per-month fees for using debit cards when its current pilot in Wisconsin and Georgia is completed in November, a source with knowledge of the bank’s plans told The Associated Press.
Chase, which operates in 23 states including Nevada, began its test in February.
But it was Bank of America Corp.’s plan to start charging $5 per month that lit the issue on fire.
Banks are justifying the fees by stating that they need to recoup revenue lost to new regulations that limit the fees they can collect from retailers for handling debit card transactions. But the new fees sparked a huge backlash.
Signs like, “I bailed out the banks and all I got was a $5 debit card fee” have been spotted at Occupy Wall Street protest in New York and its sibling protests around the country. The author of the regulations, Sen. Richard Durbin, D.-Ill, called the fee an “outrage” on the floor of the Senate.
“It is hard to believe that a bank would impose such a fee on loyal customers who simply are trying to access their own money on deposit,” he said. “Especially when Bank of America for years has been encouraging their customers to use debit cards as much as possible.”
Durbin encouraged customers of banks that charge fees to “vote with their feet,” but consumers were already ahead of him. Credit unions and community banks nationwide are reporting huge spikes in new accounts as consumers seek no-fee options.
Citigroup Inc. almost immediately pointed to its policy of not charging for debit, although at the same time it changed requirements for its mid-tier checking accounts to make it harder to avoid a $20 per month service fee.
On Friday, Bank of America bent. A source at the bank, who asked not to be identified because the policy is still evolving, said it likely it will offer ways for its customers to avoid debit card fees through using direct deposit, maintaining minimum balances or using Bank of America credit cards.
But a good deal of damage is already done. “Too little, too late,” one angry customer posted on Facebook. “I’ve already switched to USAA!”
Review-Journal writer Chris Sieroty contributed to this report.