Bank of America has announced a quarterly profit of $6.2 billion, a significant jump from its same-quarter loss of $7.3 billion last year, the turnaround coming largely from the sale of its shares of a Chinese bank.
Despite such significant numbers, Bank of America has thus far not backed down on its decision to start the unprecedented charging for debit card services at $5 a month. The fees started coming out, now at many major banks, as a result of the semi-failed swipe fee battle the banks were waging over the summer of 2011 and before, which limits their ability to charge for debit card payments, which added up to many billions per year.
Now that they don’t have this method of drawing revenue out of small businesses and into their own pockets, they have simply figured out a different method to accomplish the same monetary growth goal, that of charging customers directly.
When questioned as to the shift toward charging customers for services that had previously been free, Bank of America CEO Brian Moynihan claimed the bank “has a right to make a profit.”
Well, fair enough. But they already are, at the rage of $6.2 billion for this quarter, yet they demand more money on top of their current profits. This is not so much a right, but clearly an outright desire, at odds with their claims of “having to” recoup revenue from the swipe fee losses as a result of the Dodd-Frank bill. Clearly “having” to make a profit is bank-speak for “we want to make a lot of money.”
Such behavior is spurring customers in record numbers to look for bank services elsewhere, such as credit unions and smaller, regional banks, which had little or nothing to do with the absurd financial collapse of recent years. If Bank of America is going to continue charging customers increasing amounts of money for their services, they will either disappear or become decreasingly relevant in the very near future. They have in fact already lost their top spot to JP Morgan Chase. Chase, by the way, is also set to charge $3 a month for debit card fees, and has a pretty pitiful reputation among its customers already.
Strangely enough, the backlash should have set in a long time ago, though perhaps in recent years customers had sympathized with the situation to some degree, realizing that occasionally businesses make errors and shouldn’t be demonized; unfortunately for this sentiment, bankers have been paying themselves exorbitant bonuses, leaving the TARP program early to do so, and reporting record profits, largely funded by taxpayer-funded bailouts and Federal Reserve donations that have nothing to do with running business properly. The backlash is going to be big, and extraordinarily permanent.
The response is likely going to continue on the international scale, as other banks such as UBS, RBS and others have experienced some major challenges to their stability, and may experience significant threats to their existence if they don’t get their act together. We may be in for a very serious change in the next decade or two, and probably for the better.
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