Durbin to customers: Dump Bank of America

@CNNMoney October 4, 2011: 2:24 PM ET

NEW YORK (CNNMoney) -- Sen. Dick Durbin on Tuesday urged customers unhappy with Bank of America's new $5-a-month debit card fee to take their business elsewhere -- calling the fee a golden opportunity for other banks "not as greedy" to drum up new business.

"I believe in something called competition," the Illinois Democrat said on a conference call with reporters.

Last year, Durbin helped shepherd a law that limits how much banks can charge on debit card transactions -- a law that led Bank of America to recently switch to the monthly charge.

"If Bank of America wants to nail their customers with a monthly fee, I want their customers to make the conscious decision to go elsewhere where they are better treated," Durbin added.

Durbin said he's sending a letter to Illinois banks urging them to try to steal Bank of America's customers.

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"This is an opportunity for banks and credit unions to win some customers over," he said. "That is not only good business sense, but common sense."

Bank of America (BAC, Fortune 500) did not immediately respond to a request for comment.

The so-called Durbin Amendment, part of a larger Wall Street reform law, limits banks to charging 21 cents for each debit card transaction. Previously the banks would charge an average of 44 cents, mostly to retailers.

Durbin, citing numbers from the Federal Reserve, said debit card swipes cost the banks between just 4 and 12 cents -- far below even the new 21 cent cap.

The 21 cent cap is expected to cost the banking industry $5 billion a year, and other banks are considering moves similar to Bank of America's.

Last month, Wells Fargo (WFC, Fortune 500) said it will test a $3 monthly fee in Georgia, New Mexico, Nevada, Oregon and Washington for customers who use their debit card for purchases. That test begins Oct. 14.

At the end of last year, JPMorgan Chase (JPM, Fortune 500) announced a similar test, in which it charged customers in northern Wisconsin a $3 fee for using their debit cards. A Chase spokesman said last month that the tests were still underway.

Durbin said banks were trying to make debit cards "more expensive."

"If they can push people away from debit cards and into credit they make more money. I think that's really the motive behind this."

But the industry disputes Durbin's argument and says the new cap is below what it costs banks to process transactions.

The losers are consumers, while the winners are retailers that no longer have to pony up as much money, Frank Keating, head of the American Bankers Association, said on Friday.

The cap "provided big-box retailers with $7 billion in windfall profits while forcing banks to lose money on every debit card transaction," Keating said.

On Tuesday, Keating reiterated that the cap has altered the economics of debit cards.

"As a direct result of the Durbin Amendment, consumers have started paying for financial services they previously enjoyed free of charge," Keating said. To top of page

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