Officials from Bank of America (BAC) have launched a massive lobbying effort to defuse a public relations firestorm over its decision to raise fees on customers’ use of their debit cards, the FOX Business Network has learned.
The nation’s biggest bank is now reaching out to members of Congress as well as officials in the new Consumer Protection Bureau to better explain the reason why it chose to institutes a $5 monthly fee on some debit card users — a move designed to defer the costs of increased regulations, but which has come at a high public-relations cost for Bank of America chief executive Brian Moynihan.
Executives at Bank of America are now in the thorny position of explaining why they need to raise fees on hard-hit consumers, particularly to officials in the Consumer Protection Bureau, the new federal agency created as part of the Dodd-Frank financial reform law.
The bureau has broad, though as of now untested, powers to monitor and regulate banking activities involving consumers.
The political scuffle over the new debit-card fee is the latest controversy to beset the big bank in recent months. Moynihan, the CEO of Bank of America since early 2010, has come under relentless shareholder pressure to slash costs and raise billions of dollars in new capital as the bank’s stock has fallen to close to $5 a share.
Analysts and investors worry that BofA faces massive litigation costs stemming from its Countrywide Financial unit, which sold possibly fraudulent mortgages that the bank might have to make good on.
In fact, Congressional sources say BofA officials continue to meet with regulators at the Federal Reserve to discuss the progress of Moynihan’s plan to raise even more capital through the sale of assets.
Meanwhile, BofA executives are so concerned about the debit-card controversy that they fear the new consumer bureau may ultimately take some corrective action, possibly forcing a reversal of the fee. For that reason, they have scheduled additional meetings with the agency, “to explain why we had to do this,” a bank executive told FOX Business.
“Because of all the new regulations, we lost lots of revenues and these fees only partially make them up,” said the executive, who spoke on the condition of anonymity.
Banks have blamed the costs associated with the Dodd-Frank legislation for forcing them to raise fees on consumer banking services. A spokesman for Bank of America would not deny the lobbying effort; a spokesman for the consumer bureau didn’t return a telephone call and email for comment.
This BofA executive said the bank is not at the moment weighing a move that would rescind the debit-card fee, but that might change, he concedes, if the pressure — particularly from the White House — continues.
Raj Date, who heads up the consumer agency, has said that at least for now the goal of the bureau is to force banks to provide better disclosure of fees, not to dictate them.
But given the political mood in Washington, BofA isn’t taking any chances, which is why bank executives including Moynihan have been spending so much time in Washington in recent days, FOX Business has learned.
The new fee drew cries of outrage from consumer groups and politicians, including Illinois Congressman Dick Durbin., who has even urged customers to withdraw deposits from the bank in protest of the fees.
Both President Obama and Vice President Biden have criticized the new fee, with the vice president labeling it “tone deaf.”