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» Congress Asked DOJ to Investigate Whether Banks Colluded on Debit Fees

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Wells Fargo ATM

Wells Fargo ATM

Recently Democrats have asked Eric Holder, Attorney General for the United States, to investigate charges of collusion between the major banks and the announcement of new debit card monthly fees. The banks state that these fees were instituted because of changes in the consumer laws taking place in October, but it is very strange that they all came up with the same ideas, the same fees and the same terms and conditions, simultaneously.

Most businesses especially banks, such as gasoline stations, react independently, in change prices, but watch closely what their neighbors and competitors are doing. Some morning when I drive to work, I can watch the gasoline stations on each corner changing their prices at the same time; this is usually or uses to be in reaction to changes in the world market and the cost of gasoline in the commodities markets.

It only takes these fuel stations minutes to react, but banks have many legal requirements, government requirements and huge computer systems to program and huge customer number all who have to be legally notified in writing.

What is strange, is that regarding debit fees, all the major banks reacted the same within days of each other, and their terms and conditions and their programs were virtually the same!

No banks came out with a fee per use, or a base fee for having a debit card, they all launched their monthly fee, if the card is used during the month, and then a program that they could then make all the debit card purchases they wanted during that period.

The question remains, how did all of these banks virtually duplicate these conditions, before they were announced publicly if they did not plan and act in collusion?

Unfortunately we have an Attorney General who is very ineffective, we have a congress that is bogged down in budget and recession and debt program and they also do want to admit that they left loopholes in the new consumer protection act that the banks are exploiting.

The Democrats, Reps. Pete Welch (Vt.), Keith Ellison (Minn.), Raul Grijalva (Ariz.), John Conyers (Mich.) and Michael Honda (Calif.), and others said in a letter to Attorney General Eric Holder that the timing of the fee hikes raises enough suspicion to warrant an investigation.

Attorney General Eric Holder

Attorney General Eric Holder

It is acceptable for banks to coordinate their lobbying and political activity, as they did to combat swipe fee reform. As part of that lobbying fight, banks regularly warned that if the fee they were allowed to charge merchants for accepting customers’ debit cards was reduced, the banks would raise debit card fees in other ways. That, too, is well within banks’ lobbying rights.

The law prohibits the banks from coordinating the fee hikes as a group. Bank of America, SunTrust, JPMorgan Chase and Wells Fargo have all recently announced new debit card fees. We will have to wait and see what will happen on the legal end, hopefully, consumers will demand an end to these fees and either limit their use of debit cards, or move to small banks and credit unions until the big banks get the message. See also, Visa and MasterCard raise Debit Card Fees.

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