News Column

Community Banks, Credit Unions Loving Extra Business

Nov. 2, 2011

Jennifer Rich

debit card

Consumers dodged a bullet as banks, including Bank of America, backed out of unpopular plans to charge debt card fees.

In the meantime, local credit unions and community banks are thankful for the explosion of business caused by the ill-fated usage fees.

But consumer backlash may not have permanently killed new fees, bank analysts warn, as large financial institutions will try again to make up profits lost when Congress passed legislation last year capping fees banks can charge businesses.

Manatee, Fla., community banks and credit unions, as well as others across the country, have seen their number of depositors rise significantly in recent weeks.

"We've seen a significant increase in checking accounts," said Suncoast Schools Federal Credit Union Chief Executive Officer Tom Dorety. "Last month (October), we opened more accounts than we opened in the last six months in 2010. There has been phenomenal interest and growth."

Thomas Hodgson, CEO of First Manatee Bank, said the bank has gotten lots of phone calls asking about fees when Bank of America announced in early October it was going to be charging $5 debit card usage fees beginning in January.

"Branch personnel have assured them we are not going to charge fees in the future," Hodgson said.

"There have been more people in the lobby, we've been a lot busier," said Suanne White, marketing manager at Manatee Community Federal Credit Union. She called the fee announcement by Bank of America "kind of like a lightning rod" for consumer sentiment against big banks.

Consumer outcry prompted other major banks including JPMorgan Chase & Co., Wells Fargo, SunTrust and Regions to cancel trial tests of their own debit card fees. The criticism sparked a movement called "Bank Transfer Day" that is urging customers to close their accounts by this Saturday.

Brian Robinson, chief marketing officer for Florida Central Credit Union, said the credit union is "gearing up" for extra business that might come their way Saturday.

"We've definitely seen an increase in new members," he said. "We've had a 50 percent increase in membership in October from September. This has left a bad taste in their (consumers') mouths."

Philip Van Doorn, bank analyst for TheStreet.com, said it is too early to quantitatively measure whether credit unions and smaller community banks have benefited from the debit card fee fiasco.

"Banks have taken it on the chin," Van Doorn said about the Sen. Dick Durbin-championed federal legislation, which went into effect last month and caps the amount banks can charge merchants whenever customers swipe their debit cards.

JPMorgan has said it would lose $300 million each quarter as a result of the regulation and Wells Fargo said it would lose $250 million a quarter.

Van Doorn predicted big banks will continue to look for ways to increase non-interest fees.

"Deposit growth for credit unions and banks will continue to grow," he said.

Officials at Community Bank of Manatee believe they had an active role in pointing out that there are consumer-friendly banks around.

"We sort of led the nation in the promotion," said Bill Sedgeman, chairman of the board for the bank, about its offer of $5 a month to all new depositors. "We thought what the big banks were doing was ridiculous. We wanted to offer $5 to show our appreciation to our customers."

The offering quickly made news across the country and Sedgeman said the BBC even called to interview bank officials about the reasoning for the offer.

"I don't know that people will get up and move for just $5, but it did make the consumer wonder if they were banking in the wrong place," Sedgeman said.

The move brought in a lot of business, he said. In the past two weeks, the bank has seen three times the amount of business it did in any previous two-week period.

Sedgeman calls it "tremendous" and thinks the debacle has made consumers lose trust in large banks. "They are wondering, how could they make that mistake, what will they do next?" he said.

-- The Associated Press contributed to this report.



Source: (c) 2011 The Bradenton Herald (Bradenton, Fla.)


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