Dodd-Frank swipe fee changes hitting national, regional banks hard

Wells Fargo & Co., U.S. Bancorp, TCF Financial and Bank of America Corp.’s fourth quarter earnings reports showed a combined $886 million loss in swipe fee revenue as a result of the Durbin Amendment.

The Durbin Amendment, which caps the fees that banks can charge merchants to process a debit card transaction, limits the rate to 21 cents per transaction. As a result, banks stood to lose $6 billion in swipe fees.

To combat falling revenues, some banks like Bank of America Corp. announced a plan to charge card users a $5 monthly fee. Wells Fargo & Co. and SunTrust Banks Inc. tested similar plans, but public demonstration and petitioning led the banks to withdrawal their plans.

Consequently, banks have begun to make up the revenue losses by charging fees in other categories or by offering new programs to draw customers.

“Fees have gone up across the board in the industry,” Dick Bove, bank analyst from Rochdale Securities, said, according to “That’s the only way they can get their money back.”

Bank of America, as a result of the swipe fee cap, lost $430 million and its non-interest income from deposits was also down, as was its overall revenue.

“Bank of America…is currently disinvesting in its businesses and shrinking,” Gary Townsend of Hill-Townsend Capital said, reports. “It’s hard to conclude that they can be very successful in an environment like this until they repair themselves and get back into a growth mode.”

Other banks have also been hit hard, with the swipe fee changes costing the Minneapolis-based U.S. Bancorp $77 million in the fourth quarter.

Even regional banks have felt the sting, as TCF Financial blamed Dodd-Frank for its sharp drop in fourth quarter earnings, which saw card revenue down by more than 50 percent.

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