FAIR CONTRACTS’ OPEN LETTER TO BRIAN MOYNIHAN, CEO, BANK OF AMERICA

October 4, 2011

Mr. Moynihan:

On Monday afternoon, October 3, the Associated Press reported that Bank of America, your bank, America’s largest bank by numbers of deposits, had its share price sink “9 percent to $5.53, a level not seen since the financial crisis in March 2009.”  As of this morning it is still dropping.

Since your bank announced late last week its desire to charge customers a new $5 monthly fee to use a BoA debit card, your company’s website has consistently suffered problems.  Is there a correlation? 

According to the AP, your spokesperson “declined to say whether volume has surged in recent days.”  Could it be that your new fee is enormously unpopular with a significant portion of your 29 million customers and the traffic volume is taking a toll on your site as they figure out how to move their money?  

Or is it the reverse, and is BoA trying to stave off the masses by making web usage as slow and unworkable as possible to prevent customers from accessing their money through the BoA website in an impulse to move it after the fee announcement?  Perhaps Bank of America customers are exploring other options, walking with their feet, as the New York Times suggested they might do this weekend when the “Your Money” column authors rhetorically asked, “Why is anyone still doing business with banks like these?”

Either way, it’s hard to believe the $5 fee announcement and the website malfunction are a wild coincidence….especially as BoA simultaneously racks up its worst stock price in two and a half years.

Shareholders and the market may have good reason for concern:  All those unresolved mortgages sitting on your books, subprime loans that devastated families and neighborhoods with the resulting foreclosures, questionable mortgage securities, and now your customers are starting to feel that your latest initiative smacks of an attempt to reap more profits, $5 at a time, from the good citizens of this country who bailed BoA out in 2008. 

Why don’t you call off the $5 fee as an error in corporate judgment about your customers’ expectations about their bank services?  And then consumers won’t have to boycott your bank and the other banks looking to gouge their customers. 

When U.S. Senator Richard Durbin proposed an amendment in 2010 to the Dodd-Frank Wall Street Reform and Consumer Protection Act, that banks should not be allowed to reap a staggering 44 cents every time someone swiped a debit card to make a purchase, the Senate agreed with a vote of 64 to 33, a landslide given the partisan lockup in that body.   The Federal Reserve, which was put in charge of creating this regulation, listened and slashed debit fees to a cap of 12 cents per transaction, until the banking industry – your lobbyists in DC – went nuts barking about lost revenue, crying poor. 

The banks were able to howl enough to get the Fed to move up the fee cap to a range of 21-24 cents, starting this October 1.  True, the windfall revenue from the decrease of 44 to either the 12 or the 24 cents would have ended up with the merchant retailers, who may or may not have passed it on to the consumers, but anyone paying attention would know that leaving that kind of windfall revenue with banks was one way it would definitely not get passed back to consumers in a price decrease, or delay of price increase.  The Fed’s move alone put about $3.5 billion back into the bank coffers, according to some estimates.  But that just isn’t enough for BoA, is it?

We want to know why.  Banks have been reaping abundant fees on the 44 cent swipe because debit card usage has grown tremendously in the last decade.  According to the Nilson Report, debit card usage, which back in 2005 represented 22.3% of consumer purchases, is projected to constitute 67% of total transactions by 2015; purchase dollar volume is estimated to grow from $870.6 billion to $2.76 trillion.  Aren’t the banks making a bonanza of fees just in increased debit card usage volume alone? 

Mr. Moynihan, it’s time for BoA to reconsider and show Americans you are listening to them. 

Your website might start working again and you might not lose all those people who will move their money to another bank not willing to nickel and dime its customers. 

 

Sincerely,

Theresa Amato

On behalf of Citizen’s Works’

Fair Contracts Project