J.D. Thorpe

Many – including the Occupy Wall Street (OWS) crowd – have expressed outrage over Bank of America’s recent attempt to charge customers a $5 monthly fee to use their debit card. These people deplored the move and used it as another symbol of greedy Wall Street “Robber Barons” sticking it to the little guy.

However, a remarkable turn of events occurred two days ago. Bank of America backed down and eliminated their upcoming debit card fee. So who’s responsible for this victory over the bank titan?

No, it’s not the degenerate OWS liberals gathered in major cities around the nation. Rather, it’s a victory that belongs to the free market.

Bank customers are not coerced into doing business; they choose to conduct business on a voluntary basis. Customers can choose from a wide variety of banking institutions, or they are free to hide their money under their mattress if they find that option preferable.

In the case of Bank of America, executives decided to quell the backlash from customers by canceling the new program. This happened because of pressure applied by a petition that garnered over 300,000 signatures and a flood of customers who threatened a mass exodus.

Bank of America wasn’t the only major institution attempting to implement the debit card fee. JPMorgan Chase and Wells Fargo were also preparing to test a $3 debit card fee in select markets – a measure they have subsequently canceled.

Thus, the monthly debit card fee project has gone down in flames, and the banks involved are in full damage-control mode now. But there’s a more salient point that shouldn’t be neglected.

The focus should be on demonizing banks that wanted to experiment with this new model. Instead, the question that needs to be raised is: Why were these banks attempting to implement this new fee? In other words, who was the real culprit?

And the answer to these questions is quite simple: the financial reform bill of 2010.

This bill – also known as Dodd-Frank – created a massive amount of new regulations and greatly expanding the federal government’s reach into the banking sector.

The genesis of the debit card fee debacle was Dodd-Frank’s authorization of the Federal Reserve to cap the rate banks can charge merchants for debit card transactions. Using its new authority, the Fed capped merchant fees at 24 cents per transaction – cutting the fee nearly in half from the industry average of 44 cents.

As a result, JPMorgan Chase and Wells Fargo reported potential revenue losses of $300 million and $250 million per quarter respectively. These banks are not run by inherently evil people that want to see lower-income and middle-class Americans suffer.

Rather, the debit card fee was one of many options available to banks to recoup their lost revenue resulting from the Dodd-Frank legislation. Many other banks decided to eliminate free checking accounts, or to raise the monthly fees on their checking accounts.

Disparaging the banks for toying with the idea of creating a monthly debit card is an ill-advised course of action. Bank of America should be commended for its forthrightness and transparency in announcing their new fee.

The main point is that Dodd-Frank – despite the self-proclaimed sagacity of its supporters – is causing banks to seek out ways to recover lost revenue.

During the anti-bank hysteria following the financial collapse of 2008, many members of Congress tried to score populist points by hammering the much maligned banks with punitive measures such as capping the merchant debit card fee.

But despite their best efforts, this legislation – like most others – will hurt average Americans instead of their intended target.

So when you are no longer able to find free checking accounts, or you discover new, quasi-hidden fees on your account, don’t mistakenly direct your anger at your bank. Be sure to thank the real culprits – Barney Frank, Christopher Dodd, and the other “omniscient” beings that dwell or formerly dwelled in the halls of Congress.