Days after Wells Fargo announced its third quarter profits were up 21%, US Senator Dick Durbin (D-IL) has sent a letter asking the banking giant to explain the need for a new fee for its customers to access their own money using their debit card. The new fee, currently being tested in five states, is similar to the fee Bank of America announced last month to wide criticism from its customers.
“It is certainly surprising that your bank would pursue this fee strategy in light of the consumer reaction that has been prompted by Bank of America’s recent imposition of a monthly debit fee on its customers. If you were hoping that your new fee would go unnoticed, it has not,” Durbin wrote John Stumpf, CEO of Wells Fargo.
“It is unfortunate, though not surprising, that your bank is now blaming swipe fee reform for your decision to impose this significant new fee on your loyal customers… Because Wells Fargo has not made publicly available any of its own cost or revenue data regarding debit transactions, I will inform you what the publicly-available data reveals…Wells Fargo will make at least an estimated $1.22 billion in annual debit interchange revenue after swipe fee reform. This amount far exceeds any reasonable measure of the cost to Wells Fargo of conducting debit transactions. Instead of making up costs, your new consumer fee appears to be a plain attempt to increase your profits- even though your bank just reported third quarter profits that hit a record high.”
“I know that you have consistently opposed swipe fee reform, stating in your last annual shareholder letter that these reforms ‘make no sense’ and ‘distort our market-based, free-enterprise economy.’ I also recognize that banks like yours are upset at the prospect of losing some of the billions in annual debit interchange fees you received under the old unregulated swipe fee system. But you did not earn these fees by bettering your competitors in a free market, which is how Main Street businesses have to make their money. Rather, you made this lucrative revenue stream because the Visa and MasterCard duopoly fixed the same high swipe fee rates for your bank that they did for every other bank – thus immunizing this revenue stream from competitive pressure and enabling fees to keep going up even as processing costs went down. It is disingenuous for banks to claim they are somehow entitled to make up reductions to a revenue stream that they never would have received in the first place in a transparent and competitive market.”
Earlier this month, Durbin sent a similar letter to Bank of America, chastising the bank for its new fees and setting the record straight about the role of swipe fee reform in the debit card market.
Letter to Wells Fargo CEO John Stumpf (Download PDF)
– Letter to Wells Fargo CEO John Stumpf
– Letter to Bank of America CEO Brian Moynihan
– Durbin to Bank of America: Choose Between Your Customers and Excessive Profits
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