In one of the first tangible fallouts from new federal restrictions on debit card “swipe fees,” Wells Fargo bank and other card issuers are launching test programs to charge some debit card users $3 a month if they use their cards.
“We are joining other debit card insurers in testing a monthly debit activity fee ($3) on a subset of checking products for customers that prefer to use their debit card,” Lisa Westermann, Wells Fargo’s assistant vice president of public relations for card services and consumer lending, said in an e-mailed statement.
“Customers will not be charged a fee if they do not use their debit or ATM card to make purchases or payments,” she added.
Swipe fee fight fallout
Starting Oct. 1, 2011, banks can charge only about 21 cents per swipe to merchants whose customers make debit card transactions. Currently, those fees, also called interchange fees, are 1 percent to 2 percent of the purchase amount — or 44 cents on the average debit card purchase. Frank Keating, president of the American Bankers Association trade group, said in June the debit swipe fee cap would cause a 45 percent drop in revenues and predicted lenders would charge “higher fees for basic banking services.”
The new $3 fee appears to be a move in that direction. Starting Oct. 14, 2011 — two weeks after the new swipe fee caps take effect — Wells Fargo debit card customers in Oregon, New Mexico, Georgia, Washington and Nevada will be charged a “debit card activity fee” if they use their cards to make purchases. The fee will appear on monthly statements beginning Nov. 14, 2011, according to Wells Fargo fee disclosure documents. The fee applies if customers make at least one purchase during the billing cycle on a card linked to a checking account.
A spokesman for Chase Card Services confirmed that the bank began testing $3 a month fees on basic checking accounts “in a small market back in February.”
“The test continues, but has not been expanded,” Thomas Kelly said in an e-mailed statement.
Federal limits on fees
The changes are a result of Federal Reserve debit card interchange fee limits the agency was told to write under the Durbin amendment to the Dodd–Frank Wall Street Reform and Consumer Protection Act signed into law in 2010. Even before the Fed finalized the debit rules, banks were already eliminating debit card rewards programs, which are financed by merchant interchange fees.
Debit cards are the No. 1 noncash payment method in the United States. The cards are a convenient way for customers to access funds held in checking and savings accounts.
Poll: Many customers would stop using debit card
Some consumers may rethink using their cards because of the monthly fees, which would come to $36 a year with monthly debit use.
An Associated Press/GfK poll conducted in June 2011 found that 61 percent of respondents with debit cards said they would switch to another form of payment if their bank instituted a $3-a-month usage fee. Only 38 percent said they would keep the debit card. Likelihood of dumping the debit card increased as the monthly fee rose. Asked how they would react to a $5 monthly fee, 66 percent said they would switch. The number grew to 81 percent if charged $7 a month. Most were likely to switch to cash, then checks, then credit cards.
Banks may not feel they have much choice: During Wells Fargo’s July 19 second quarter earnings call, Chief Financial Officer Timothy Sloan said the cap on swipe fees will cost the bank $250 million per quarter beginning in the fourth quarter of 2011. “We expect to recapture at least half of this through volume — half of this over time through volume and product changes,” he said.
Westermann said the $3 usage fee is waived for some checking accounts and debit card users should check with their local bank branch to see how they may be impacted.
She adds: “We regularly review our pricing and take into account the needs of our customers, industry trends, the market competition, and our cost of doing business. Our goal is to set a fair price that is consistent with the value of each product or service.”
An Amazing Indictment of Obamanomics: Banks That Don’t Want Deposits
Posted by Daniel J. Mitchell
I’ve commented on the failure of Obamanomics, with special focus on how both banks and corporations are sitting on money because the investment climate is so grim. Not exactly flattering to the White House.
Using Minneapolis Federal Reserve data, I’ve compared the current recovery with the expansion of the early 1980s. Once again, not good news for the Obama administration.
And I’ve shared a couple of cartoons — here and here — that use humor to show the impact of bad public policy.
But here’s a Bloomberg story that provides what may be the most damning evidence that the President’s big government agenda is a failure:
U.S. regulators have asked some banks to take more deposits from large investors even if it’s unprofitable, and lenders in return are seeking relief on insurance premiums and leverage ratios, according to six people with knowledge of the talks.
Deposits are flooding into the biggest U.S. banks as customers seek shelter from Europe’s debt crisis and falling stock prices. That forces lenders to raise capital for a growing balance sheet and saddles them with the higher deposit insurance payments. With short-term interest rates so low, it’s hard for financial firms to reinvest the new money profitably.
…At least one firm, Bank of New York Mellon Corp., tried to recoup some of the costs by charging depositors 13 basis points, or 0.13 percent, for holding unusually high balances.
Let’s think about what this article is really saying. Banks normally make money by attracting deposits and then lending that money to people and businesses that have productive uses for the funds.
Yet the economy is so weak that banks are leery of taking more money. The story is complicated by other factors, including capital flight from Europe, taxes (or premiums) imposed by the Federal Deposit Insurance Corporation, and various regulatory issues. But even with these caveats, it’s still remarkable that banks want to turn down money — or charge people for making deposits. That’s sort of like McDonald’s turning away customers because the firm loses money by selling Big Macs and french fries. Or, better yet, like McDonald’s turning away free goods from suppliers because not enough people want to buy the final product.
Daniel J. Mitchell • August 26, 2011 @ 1:09 pm
And how about this little beauty:
The Justice Department has agreed to end its investigation into an international financial network with ties to the Muslim Brotherhood and a Saudi prince in a settlement in excess of $30 million, sources tell the Investigative Project on Terrorism.
But DOJ officials refuse to release a copy of the settlement or make any comment on it.
“Unfortunately, we’re unable to provide anything in connection with this matter,” DOJ spokesman Charles Miller wrote in response to a query Aug. 16. He did not contest the existence of the settlement with the Islamic Investment Company of the Gulf (IICG). Repeated attempts to obtain the settlement, or at least a clear explanation of why it cannot be released when most government settlements are a part of the public record, have been unsuccessful.
“We will have no further comment,” Miller said Wednesday.
Reports of a grand jury investigation into an IICG domestic affiliate called Overland Capital surfaced early in 2007. Though the grand jury was convened in Boston in September 2006, a terror-financing prosecutor from DOJ was leading the tax evasion probe into the bank, the Wall Street Journal reported. Overland Capital allegedly was controlled by the Dar al-Maal al-Islami Trust (DMI), an Islamic financial institution founded by Saudi Prince Mohamed al-Faisal and which had at least two influential Muslim Brotherhood figures on its board, the Journal reported.
(Excerpt) Read more at familysecuritymatters.org …
Bernanke, Buffett, No Volume
Posted by Ann Barnhardt – August 26, AD 2011 12:54 PM MST
1. The Bernanke said nothing this morning, which implies that QE3 is coming. Of course it is. As I have said before, where in the hell else are they going to get the money to bail out Bank of America, Citigroup, JP Morgan Chase, Wells Fargo and the rest when they finally collapse in the not-too-distant future? Do you think they are actually going to do the right, logical, sensible, moral and mathematically feasible thing and let these banks fail like they should? Of course not. Because that would require that these people suddenly develop both intelligence AND integrity. It ain’t happening. Don’t serve me dripping sewer scum and tell me it’s arugula in a balsamic vinaigrette.
2. Warren Buffett was “inspired” to pump $5 billion into Bank of America whilst literally taking a bath earlier this week, or so he says. And after taking a call from Barry. And deciding to host a fundraiser for Barry. From the bathtub to the deal being done was 24 hours, apparently enough time for Buffett to perform due diligence on a mega-bank that is sextuple-bankrupt. Riiiight. So Buffett gets a 6% dividend on $5 billion at the behest of Obama-Jarrett, and in exchange will host fundraisers for Barry. The REALLY funny thing is that everyone around the government and Bank of America have been insisting that they are in great financial shape – so why is this $5 billion pump / quid-pro-quo even necessary? Word to the wise: if you have money in Bank of America, GET IT OUT OF THERE. NOW. Buffett has almost certainly been given a guarantee on his “investment”. It is all Kabuki Theater. Don’t fall for it. Buffett isn’t risking ANYTHING – he has a de facto in-the-money put underneath him on this. He is being repaid for loyalty to Obama and for publicly parroting the regime’s propaganda on higher taxes for the rich.
3. Volume on the stock market side of things is drying up. All that is left are the high frequency computerized trading schemes, which are giving the illusion of volume. All of the real people are gone. This is very, very bad and is also why it is so incredibly choppy. Read THIS POST http://market-ticker.org/akcs-www?post=193037 to understand. When I read it, my blood ran cold. Another post to read is over at ZeroHedge.com .
Guys, the so-called “regulators” – both government and private self-regulatory bodies – who should be jumping all over this stuff and sending people to jail for DECADES for these crimes, are totally AWOL. Why? Because they are either completely corrupt and in on the whole scheme, or they are stupid. Those are the two categories of people who populate the regulatory bureaucracies. Corrupt and incompetent (cough, affirmative action, cough, cough). One. Two. That’s it. Market integrity basically does not exist – hell, that’s the entire situation in a nutshell. Our entire financial system is completely and totally devoid of integrity because the people inside of it are completely devoid of integrity. This is like a game of Jenga. The tower is very, very high; many pieces have already been removed, and the next piece that gets pulled out is going to collapse the whole thing. GET OUT OF THE WAY. NOW. DO YOU UNDERSTAND? NOW.
And while we are talking about things that will cost us an arm and a leg and unfairness: How come Obama has declared New York a Federal Disaster Area before Hurricane Irene has even hit t Bloomberg’s request? But when half of Texas burned down they didn’t get a dime?!?