Bank Of America Backs Down
Chalk one up for the consumers. Bank of America has just announced it is aborting plans to slap a five-dollar monthly fee onto consumers who have the effrontery to access their own money.
This is not only a victory for consumers (and the Occupy Wall Street folks, incidentally), but a triumph of mathematics and economics. Because it is ridiculous that big banks should even contemplate these fees in the first place.
A bit of banking history, for those too young to remember: before there were debit cards, there were these little bits of paper called "checks." You bought some groceries (or whatever), and you took one of these slips of paper and wrote down the merchant's name, the date, the amount, and then you signed it. You handed this magic slip of paper to the merchant, and they let you walk out of their store with your goods. The merchant then took the paper to his or her bank, and gave it to them. Their bank would contact your bank, and the piece of paper would travel through the "snail" mail. When it arrived at your bank, someone would transfer electronically the amount of money from one bank to the other.
The whole process was a long one (checks sometimes took weeks to "clear"), and it was very labor-intensive. Banks had to hire lots of people to process these transactions, which cost them a lot of money in salaries and benefits. But it was easier (and safer) than everyone having to carry around wads of cash all the time. So we all lived with the system as the best that anyone could think up at the time.
Jump forward to the introduction of "check cards" (or, as they later became known, "debit cards"). All of a sudden you could use a piece of plastic that looked exactly like a credit card, and have the entire transaction take place immediately and electronically. This saved a lot of money. For the banks.
You can see where I'm going with this, can't you?
The customers all went along with the new scheme because it was easier than writing checks (personally, I can't remember the last check I wrote...). All of a sudden, your ATM card was -- hey presto! -- as useful as a credit card. You didn't have to wait in line as long at the grocery store, and everyone was happy. The banks were especially happy, because the widespread use of the new debit cards meant they could save a whopping amount of money on salaries for people processing checks.
The consumers did not begrudge the banks making a bigger profit, either. "More power to you!' said the consumers.
Soon, however, the banks got greedy. They realized that credit card companies were making lots of profit by charging the merchants a fee to process the transactions. At the start, the banks didn't charge these fees because they were already making bigger profits just by saving money on all that check-processing. But they got jealous of the credit card companies' racket, and so they too started charging the merchants for debit card usage. Just because they could.
This is where politics entered. The merchants went to Congress and got them to pass a law limiting the amount banks could charge for this service (this fee, remember, didn't even used to exist, and the banks were still making more money under the scheme without even charging this fee).
The banks freaked out, and decided to use their customers as, essentially, a giant lobbying organization. "Look," the poor, poor banks said to their customers, "We hate to do this, but because the Democrats limited a fee we didn't even used to charge, we are forced to charge you $60 per year to use your debit cards. So sorry. If you don't like it, contact your congressman."
This has now blown up in the banks' faces. Because not all banks were charging the fee. So customers "voted with their feet" and began pulling their money out of the banks who were threatening the new fee. Chief among them, Bank of America. Customers got angry at the banks, not at the Democrats.
There's a big lesson in there for Democrats. The Democratic Party should be -- right now -- making an enormous stink over the Republicans in the Senate blocking a vote on the presidents' choice to head the new Consumer Financial Protection Bureau. This should be Complaint Number One on the lips of every single Democratic politician interviewed anywhere. After all, this bureau was created to stand on the side of the consumer, to protect them against just this type of abuse by the banks. And it can't do so because Republicans are refusing to vote on any nominee -- because they don't like the new bureau one tiny little bit.
The entire debt card fee fiasco should become one of the poster children for Democrats in the 2012 campaign. They should pound this concept into the ground: Democrats are for consumers, Republicans are for big banks.
Since we are talking about Democrats, however, I am not exactly holding my breath waiting for them to do so. They don't have a great track record, in other words, on striking while the political iron is hot, so to speak.
The people are leading. The consumers forced the hands of the big banks. The craziest thing about this whole public relations nightmare for the banks is that they announced this stuff after Occupy Wall Street had begun. They simply misread the angry mood of the public -- and now, they have backed down.
Once again -- the people are leading. The only question now is whether the smart politicians will follow.
-- Chris Weigant
Follow Chris on Twitter: @ChrisWeigant
I write fewer than a dozen checks a month. There are still a lot of people who may have debit cards who do not do their business on-line, so checks are still needed to pay bills. However, they are now almost as cheap to process. They still require a tiny bit of external handling at the bank end; the current batch of checks has to be stacked neatly with the bottom edges aligned so they can run smoothly through the machine; and someone has to type in the handwritten amount of the check so it can be imprinted on the bottom with the account information. (Some of that may be automatic, and large companies that print checks may also print the amounts on the individual checks.) Then the pile gets read into the machine, and reading each check at that point involves no more work than a card swipe. (There's one more bit; the checks are scanned so for $3-$5/month you can get copies of the images of the checks with your paper statement; or you can download the image on-line. Everything else is the same as the debit card swipe as far as labor to the bank. Do you think someone actually compares the signature on the check to the official signature on the card? Hell, they weren't doing that in 1968 when some flunky at my bank debited someone else's starter checks in my account -- different signature, different color checks, different account number.
Or you can go back to the really old days when the store had a book of blank checks from each local bank - you could write your check on any of those, and it was trusted at least till your check was received at the given bank. Our neighborhood stores knew us well enough to know whether our checks were going to be valid.
Oops. Here it is: </i&rt;
In a similar vein, I always hated when the banks started charging an ATM "convenience" fee when me using an ATM saves the bank a tons of money paying tellers.
I voted w/ my feet a long time ago. But OWS has done a great job raising this issue and getting mass numbers of people to consider it.
I've talked to so many people who have said "I can't come down and demonstrate but I recently joined a credit union."
-David
The last box of checks I got has never once been used. The only time I even ripped off a check to use, it was to scratch "VOID" across the face and hand it to the company's Direct Deposit coordinator (back before I got fired for blogging).
I'm curious about something as I haven't been following the OWS movement ... very closely ... ahem ...
How can this move by BofA be attributed to the Occupy Wall Streeters? Was this one of their specific demands?
Chris,
There's a big lesson in there for Democrats. The Democratic Party should be -- right now -- making an enormous stink over the Republicans in the Senate blocking a vote on the presidents' choice to head the new Consumer Financial Protection Bureau. This should be Complaint Number One on the lips of every single Democratic politician interviewed anywhere. After all, this bureau was created to stand on the side of the consumer, to protect them against just this type of abuse by the banks. And it can't do so because Republicans are refusing to vote on any nominee -- because they don't like the new bureau one tiny little bit.
Now this is what the OWS crowd should be crowing about.
By the way, I don't know enough history, nor am I old enough, to know the first thing about cheques. Heh.
A bit of banking history, for those too young to remember: before there were debit cards, there were these little bits of paper called "checks." You bought some groceries (or whatever), and you took one of these slips of paper and wrote down the merchant's name, the date, the amount, and then you signed it. You handed this magic slip of paper to the merchant, and they let you walk out of their store with your goods. The merchant then took the paper to his or her bank, and gave it to them. Their bank would contact your bank, and the piece of paper would travel through the "snail" mail. When it arrived at your bank, someone would transfer electronically the amount of money from one bank to the other.
It used to be, until very recently, that a "check" could be anything that had the afore mentioned information written down. Legally, you could write PAY TO THE ORDER OF JOE BLOW, the amount, your account number and the date on a fig leaf or a pizza box and it would be a legal check.
That was pre 9/11... I even print my own checks on plain print paper to pay immediate bills that... ahem.. show up at our door step. :D My bank accepts them because they know me, but no other bank will...
We mostly use checks for our mortgage payment (it's actually easier and better than a money order) and the afore mentioned utility payment that shows up at our door.. :D
Jump forward to the introduction of "check cards" (or, as they later became known, "debit cards"). All of a sudden you could use a piece of plastic that looked exactly like a credit card, and have the entire transaction take place immediately and electronically. This saved a lot of money. For the banks.
Allow me to post a passage from an "old" Star Trek novel:
"We'll arm ourselves," Kirk told him without hesitation. "But how do we do it? What do we trade for the firearms?"
The Mercans must have some concept of money because of their planet-wide commerce. Kirk hadn't seen it. And he didn't have any of it.
Orun answered his question by taking them to a firearms shop. The Mercan selected four of the best weapons, complete with metal-cased cartridge ammunition and baldrics. Orun simply signed the chit.
"Who's paying for these?" Kirk still wanted to know. "The Guardians," Orun told him with a smile. "The
bankers will simply deduct the amount from the
Guardians' accounts and add the amount to the accounts of the shopkeeper."
"Don't you exchange symbols of value?"
"Why? The bankers keep the score."
"But suppose the Guardians won't permit the transfer of money for this?"
"Then they'll take it out of my account, and the bankers know my account identification from my traveler control . . . which is in the hands of the Guardians right now."
The Mercans thus revealed to Kirk another aspect of their culture that would ease their way into membership in the Federation.
The Mercans not only had the concept of money, but of credit or money that exists in the future.
Furthermore, they had computers capable of keeping track, and therefore needed no "hard money" such as gold.
Some computer technology would, of course, be a technical fallout of the traveler system . . . or a
precedent of it.
-THE ABODE OF LIFE
This novel came out in 1982. While the first "debit card" was introduced in 1978 by Seattle First National Bank, it didn't go national until 1984 when Landmark created a nation-wide ATM network.
I remember reading this book and thinking what a kewl monetary system that would be.. :D
Once again, science fiction becomes science fact...
As for this being a win for the Oowzers.. I'll begrudge them that win only because it's the one bright spot in their otherwise dismal scandal-ridden existence...
Michale.....
I write a ton of checks, at least five each month. My son's after-school program isn't set up to take credit or debit cards, and neither is my landlord. Even worse, I have to pay for my kids' lunches by sending cash or money orders to school with them. These are kids who lose their backpacks about three times per week.
How can this move by BofA be attributed to the Occupy Wall Streeters? Was this one of their specific demands?
I'd attribute their decision to the media attention it's gotten. BofA was looking particularly egregious to the point where even a billion or so dollars from fees was not going to be worth it.
Much of this media attention has been as a result of the protests.
Hard work never hurt anyone...
http://www.foxnews.com/opinion/2011/11/02/hey-occupy-whatever-happened-to-starting-at-bottom-and-working-your-way-up/
But, apparently, the Oowzers aren't taking any chances....
Michale.....
BTW, Liz, in the spirit of giving credit to some Democrats, this was good to see ...
http://www.dailykos.com/story/2011/11/02/1032495/-Six-Dem-Senators-Introduce-Constitutional-Amendment-to-Overturn-Citizens-United?via=sidebyuserrec
David,
BTW, Liz, in the spirit of giving credit to some Democrats, this was good to see ...
You HAVE to be frak'in kidding me!!!
restore the ability of Congress to properly regulate the campaign finance system.
That's like restoring the ability of the jackals and hyenas to properly regulate the hen house.
Tell me you are not serious!!???
Michale.....
Look, I was so gabberflasted, I forgot to close my attribute!!!!
Michale.....
Michale,
I'm willing to support plans from either party to limit the influence of money on those in government. Hell, it's progress just to have people talking about issues that actually matter. Rather than stuff like this ...
http://www.usnews.com/opinion/blogs/susan-milligan/2011/11/01/congress-wastes-time-on-frivolous-votes
-David
David,
I'm willing to support plans from either party to limit the influence of money on those in government.
I am in complete agreement. I just don't think the best way to limit money going to Congress is to turn the enforcement over to that same Congress....
Rather than stuff like this ...
http://www.usnews.com/opinion/blogs/susan-milligan/2011/11/01/congress-wastes-time-on-frivolous-votes
Oh and the Dem Senate taking up legislation to make October "Peach Cobbler" month (or some such silliness) when Obama was pushing for his JOBS legislation, is any better???
Once again, we see there isn't any charge that can be hurled at the Right that cannot also be hurled at the Left...
As far as the Oowzers go...
http://nbcbayarea.com/news/local/Occupy-Oakland-Hosts-General-Strike-133081358.html
I thought the Oowzers were FOR jobs?? Now they are preventing people from working and earning their pay..
Nice...
http://news.yahoo.com/occupy-oakland-protesters-tear-gased-police-101824932.html
http://nydailynews.com/new-york/bloomberg-strikes-tougher-tone-occupy-wall-street-article-1.971097
http://baltimore.cbslocal.com/2011/11/02/city-cuts-power-to-occupy-baltimore-site/
Looks like the Oowzers are wearing out their "welcome"...
Michale....
The magical hand of CW shows itself.. :D
Thanx, CW....
Michale.....
A great story about occupying your local bank ...
http://www.dailykos.com/story/2011/11/02/1032624/-He-has-a-right-to-speak,-said-the-cop-to-the-banker?via=blog_1
-David
A great story about occupying your local bank ...
http://www.dailykos.com/story/2011/11/02/1032624/-He-has-a-right-to-speak,-said-the-cop-to-the-banker?via=blog_1
"I've lost my best student to madness"
-Surak, Father Of The Vulcan Reformation
:D
Michale.....