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Oct 28
2011
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HOW IS YOUR BANK HANDLING THE DURBIN AMENDMENT SEA CHANGE?Posted by Steve Cocheo in Pass the Aspirin The Blog   |
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The Headache: The controversial Durbin Amendment went into effect in early October.
Our Question: How are institutions in your market reacting? Has your own bank made any changes?
Come see what other bankers think, and add your own views
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How is the Durbin Amendment playing in your markets? What impact has it had on your bank's efforts?
After much controversy, the Durbin Amendment's debit interchange pricing provisions went into effect at the beginning of October. We asked prescribers how institutions in their markets were reacting, and if their banks had made any adjustments to their own product and practices.
Below is a sampling of what we've heard from community bankers. Add your own observations, strategies, and viewpoints.Please note: The $5 fee by Bank of America, for debit card usage, which several bankers answering the question thus far have referred to, was rescinded by BofA on Nov. 1. To read the bank's announcement, click here.
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Raymond O?Conor, chairman, president, and CEO, Saratoga National Bank & Trust Co., $289.8 million-assets, Saratoga Springs, NY
said:
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In the aftermath of the announcement by Bank of America that it would institute a $5 fee for certain customers that use debit cards, we have received calls from local media as well as from local consumers as to whether we will be charging a fee for debit card use. Our response is that we have never charged a fee and do not plan to charge a fee. However, I believe that one of the consequences of the Durbin Amendment is that all banks, large and small, will see deterioration in their debit card income. I hope we can always provide free checking and free debit cards, particularly to the most financially challenged folks in our community, but Senator Durbin and his colleagues in Washington, D.C., aren?t making it any easier to continue that tradition. |
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Ken Burgess, chief executive officer, FirstCapital Bank of Texas, $565.6 million-assets, Midland, Texas
said:
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Our bank has been monitoring our debit card profitability since the passage and implementation of the Durbin Amendment. At this point, it appears that the interchange processing system is working properly and we are receiving the appropriate pricing for our transactions. However, we do expect that the market will eventually drive transaction pricing down for banks under the $10 billion-assets threshold. When that happens, we will not be willing to lose money on every transaction that we process and we will be looking for ways to maintain our income on the product or look to shift to another payment channel. |
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Chip Register, senior vice-president and chief information officer, The Fauquier Bank, $598.5 million-assets, Warrenton, Va.
said:
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As a community bank below the $10 billion-assets size, our perspective of the implementation as mandated by the Durbin Amendment is taken with a careful eye toward cautious optimism. We joined our efforts to those of our larger banking brethren. However, the results of those efforts created the current debit card environment, which represents income loss for certain financial institutions and income opportunity for others. Finding ourselves in the latter group of banks, we continue to leverage debit card services as part of the payment services provision offered to our clients without any additional expense to the customer to support this payment channel. We have implemented no changes to the product/service offering and continue to market a checking product option which has no minimum balances or other qualifying criteria. Resulting from this strategy, our bank is experiencing good account growth as banking customers seek lower-cost checking options and financial relationships. We expect to continue to offer free checking while watching closely to determine if the discussed "market pressure" will impact interchange income over the months to come. At present, we observe nothing in the debit card space which gives rise that merchants will adversely treat patrons from exempt banks, and the interchange fee income remains consistent with the pre-Durbin period. |
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Ron Butler, president and CEO, First Financial Bank, N.A., $762.9 million-assets, Abilene, Texas
said:
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The big banks in our market are introducing large fee increases. We do not anticipate having large fee increases, but we will focus on making current unprofitable customers profitable. |
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Sharon Burran, president and COO, Woodhaven National Bank, $416.8 million-assets, Fort Worth, Texas
said:
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Of course, the BofA flap over their $5 monthly debit card fee is the most prominent matter in the market. We are aware that customers may be moving from the big banks to community banks over such fees. However, this may not be ideal for us due to the excess liquidity that we currently hold on our balance sheet. Who knew that this would ever be a problem? However, so far, we have not seen customers beating down our door. At our institutions, we have done away with free checking and replaced it with a tiered account allowing customers to avoid monthly fees by meeting certain activity points, i.e. direct deposit, e-statements, use of debit card, etc. We hope to regain some of the fees lost due to the changes in overdraft protection rules. As of yet we are not affected by the decrease in the interchange rate due to our size, however we know it is inevitable that changes in our fee structure will be necessary to compete in the marketplace. |
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Ashley Hanna, vice-president/audit & compliance office, Community National Bank & Trust of Texas, $356.2 million-assets, Corsicana, Texas
said:
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We recently implemented a $5 fee for non-use of an ATM or debit card for a period of 60 consecutive days, to be repeated every 60 days for which no debit activity occurs. We are hoping to be able to avoid implementing a monthly usage fee, but it is not totally off our radar. |
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Bryan Luke, EVP, Hawaii National Bank, $585.4 million-assets, Honolulu, Hawaii
said:
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Because we are less than $10 billion in asset size, we are exempt from the interchange cap; we have already received our official exemption. It's the large card issuers that are implementing changes such as modifying their rewards programs and in the case of BOA assessing monthly fees to help compensate for the loss of potential interchange income. However, Durbin will affect us relative to our ATM card program. Currently, we currently allow ATM card customers to use their cards for pin-based POS transactions. We will have to either join a second network to comply with the network exclusivity requirement or do away with POS usage on the ATM card. |
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