[Congressional Record (Bound Edition), Volume 157 (2011), Part 11]
[Senate]
[Pages 16408-16409]
[From the U.S. Government Publishing Office, www.gpo.gov]




                       DEBIT AND CREDIT CARD FEES

  Mr. DURBIN. Madam President, Bank of America made an announcement. 
They announced they were eliminating their proposed $5 monthly fee for 
the use of a debit card. We have kept track and I believe every bank 
across America has said we are abandoning this approach, and it is a 
good thing. It is an indication to me that consumers across America 
have a much larger voice in this process today than they did even a few 
weeks ago.
  Consumers and customers of major banks paid close attention when many 
of these banks, such as Bank of America, said they were going to charge 
these customers $5 a month to have access to their own money in their 
checking account. I was asked at the time: What should we do? I said: 
Customers of these banks should vote with their feet. Start looking for 
another bank. Find a bank or a credit union that treats them in the 
manner they want to be treated--fairly and respectfully.
  The message got out, and that message ended up creating a substantial 
move of customers from some banking institutions to others. Some 
reports suggest the activity on credit union Web sites is now up 800 
percent. The people at community banks all across America have signs in 
front of their banks saying, for instance, the one in Georgia: We agree 
debit cards should be free.
  What we have at work is two very fundamental principles of our 
economy, the free market economy--transparency so people know what they 
are being charged, and competition so they have a choice. I think those 
are the two pillars of a successful free market economy. Now the 
banking industry, in many respects, is being introduced to it. I think 
this is a healthy thing.
  Prior to October 28, several large banks had announced they would 
begin charging monthly debit fees on many of their customers' accounts, 
Bank of America, $5; Wells Fargo, $3; Chase, $4; SunTrust of Atlanta, 
$5; Regions Financial of Birmingham, AL, $4. Numerous other large banks 
had made it clear they would not charge the monthly fees, including: 
U.S. Bancorp, Citigroup, PNC, KeyCorp, USAA, and more.
  In response to consumer reaction to their fee announcements, on 
Friday October 28 Wells Fargo and Chase announced they were abandoning 
their plans to charge these fees.
  On Monday, October 31, SunTrust and Regions Financial announced they 
would also abandon their fee plans.
  Today, Bank of America announced it too would abandon its monthly fee 
plans.
  Warren Buffett--a man I have come to know and respect--is an investor 
in some of these large banks, and he was asked over lunch recently to 
react to the Bank of America $5 monthly fee. He lifted his glass of 
Coca-Cola and said it was like New Coke. It told the story that 
sometimes large companies lose touch with their consumers and their 
customers and make bad decisions.
  The question is, What will come of this next? I think we ought to ask 
ourselves: What have we learned from this experience over the last 
several weeks and what do we hope it leads to? Certainly, we want more 
transparency, competition, and choice, but in order

[[Page 16409]]

for that to happen, we need more disclosures so the average customer of 
a bank knows what they are getting into.
  Have any of us taken the time to read the back of that monthly credit 
card statement? As a lawyer, I can tell you that if you asked for the 
entire statement concerning fees at banks, it is over 100 pages. It is 
almost impossible to decipher. We have to get down to the basics, where 
we understand our relationship with these financial institutions so we 
can choose those that serve our needs or the needs of our businesses. 
That is why the Pew Charitable Trusts came up with a valuable 
suggestion. They have a one-page disclosure form that lists the basic 
fees banks charge. What they are suggesting is every bank should adopt 
this just as we have a basic box on the back of food products with 
ingredients we can turn to. It shows how many calories, how much 
sodium, how many carbohydrates. We could have a basic disclosure on 
every bank's Web site so America can go shopping. Competition, free 
market. I think that is a healthy thing.
  The second thing we need to follow on is the discovery that there are 
such things as swipe fees. We suspected it, but we didn't know what was 
going on when we handed over a piece of plastic at a restaurant or 
grocery store to buy something. It turns out every time that is swiped, 
the retailer, the restaurant or the business, is charged. How much are 
they charged? A variety of different amounts. Frankly, that grocery 
store, that bookstore has no ability to negotiate that fee. It is a 
``take it or leave it'' situation. You want plastic from Visa or 
MasterCard, then you go ahead and pay this fee or else. That has 
changed, and the world has changed with it.
  When the Federal Reserve got the new authority October 1 to put in 
place a reasonable swipe fee for debit cards at about 21 cents a 
transaction, things started changing. There is a lot of money at stake. 
If we add up all the money collected at banks across America for swipe 
fees, for debit and credit cards, it is about $50 billion a year. It is 
a huge amount. We all pay it. We pay on the bottom line at the 
restaurant or grocery store or wherever we shopping if we use plastic.
  Now there is a 21-cent ceiling established by the Federal Reserve on 
the debit card fees that Visa and MasterCard set on behalf of large 
banks, and that is what caused all the reaction by the banks, saying 
they were going to charge their customers even more because of it.
  We need even more disclosure. For the largest banks in America, the 
top 1 percent of banks, if we go to an ATM machine today and put in our 
card, at some point they will usually notify us what the ATM fee is and 
we can accept it or not accept it. I think that same kind of disclosure 
should be made on swipe fees. On the monthly credit card statements 
across America, we should see in parentheses next to purchases how much 
was paid by that retailer to the credit card company and the card-
issuing bank. I think it will be a surprise to many people as to how 
much they are paying every time they use plastic. I should say how much 
retailers are paying and then charging customers in higher prices 
because of swipe fees when they use plastic. That is more information. 
That is more transparency. That allows us to understand the 
relationship that, to this point, has been hidden in secret. I think 
that is an important thing.
  I have also been talking to Senator Reed of Rhode Island. He has some 
thoughts on interesting legislation he and I are working on concerning 
the actual cost of credit card fee transactions to the banks and to the 
credit card companies so we will have a better understanding in that 
category as well.
  What we are saying is something significant has happened over the 
last several weeks. I hope it is the beginning of a trend. One way to 
make sure this trend continues to the benefit of consumers and families 
and small businesses all across America is to make sure Richard Cordray 
is appointed as the head of the Consumer Financial Protection Bureau. 
This, to me, is an agency which can continue this battle on behalf of 
consumers. It is literally the only consumer financial protection 
agency in the Federal Government.
  Many on the other side of the aisle don't like it. They don't believe 
in strong government oversight of these financial institutions on Wall 
Street. I disagree. I think Americans deserve to be given the basic 
information about their financial transactions so, with that 
information, they can make their own decisions. I am not saying 
government should steer them one way or the other, but at least give us 
the basic information. Let me decide the best bank for my family. Let 
me decide the best credit card or debit card for my family or my 
business. That is all we can ask.
  Finally, let me say this: This establishment of a debit card swipe 
fee limit is a breakthrough for many retailers. When I talk to 
retailers, large and small, some of them chain stores and others just 
local stores, they were getting killed with this fee. It turned out to 
be the second or third most expensive item every single month. After 
personnel, after rent, here came the swipe fees they had to pay to 
Visa, MasterCard, and the banks that issue their card.
  Now these retailers feel like there has been a light that has been 
shined on this process and a limit that has been established when it 
comes to debit cards. Sadly, in some cases it has been abused. Redbox, 
which is a retailer of movies that most of us see--even in Springfield, 
IL--next to the drug store, where we put in $1 and take a movie home, 
has announced they had to raise the price of their movies from $1 to 
$1.20 because of this new law. We looked into it. Here is what 
happened. They used to be charged a lower swipe fee by the debit and 
credit card companies, but now these companies are trying to make up 
their money that their bank allies are losing from this ceiling and 
they are raising their lower swipe fee rates to unreasonably high 
levels and passing the higher charges along to merchants like Redbox. 
So some merchants need help.
  The Federal Reserve has continuing jurisdiction and authority when it 
comes to that help. I hope they will take a look at some of the 
consequences to companies such as Redbox. I think what happened to them 
is unreasonable and unfair. I think the Federal Reserve has the 
authority to change it.
  So we are at a tipping point. For years, the big banks had been 
rigging the rules with a lot of fees and charges we were not even aware 
of. The consumers of America have said enough. Through a combination of 
reasonable regulation and consumers voting with their feet, we are 
bringing transparency and competition back to the financial services 
industry. It is working and it is long overdue.
  Consumers are now saying they will only do business with banks that 
care about serving them instead of squeezing them. It is a good thing.
  We have to do more things. Let's confirm Richard Cordray and let's 
get it done soon so the Consumer Financial Protection Bureau can go to 
work to help us. Let's ensure that all bank fees are transparent, such 
as the model checking account fee disclosure I mentioned earlier from 
the Pew Charitable Trusts. And let's ensure that all swipe fees are 
transparent, because consumers ultimately pay those fees in higher 
prices.
  By promoting transparency and competition, we're going to help 
restore the balance between Wall Street and Main Street.
  Mr. DURBIN. I suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Ms. LANDRIEU. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.

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