US Bancorp Will Raise Checking Pricing Earlier Than Expected
January 19 2011 - 12:19PM
Dow Jones News
U.S. Bancorp (USB) plans to introduce new pricings on checking
accounts and remove rewards before the middle of the year, Chief
Executive Richard Davis said Wednesday, saying the bank was
speeding its plans as regulations loom on what banks can charge on
debit card swipes.
Banks are rapidly doing away with free checking accounts and
implementing new fees after a provision of the Dodd-Frank financial
reform said banks would be limited on how much they could charge
retailers for every swipe of a debit card. The fees, known as
interchange fees, were capped at 12 cents a transaction by the
Federal Reserve, a rate banks considered draconian. Many bank
executives say debit cards won't be profitable anymore.
Davis, speaking to analysts on a conference call, admitted he
was switching pace from his previous statements, when the bank had
hoped to watch competitors toy with consumer fees first and then
implement what worked best.
"We are not going to be a late follower anymore. We will be
right in the game," Davis said. "We will see sometime in the early,
middle part of this year our own actions in making sure that we
have fair pricing for checking products."
Davis said the Fed's announcement in December forced U.S.
Bancorp to reconsider as it would cost just over $400 million in
revenue. He said the rate was "so sufficiently and absolutely below
the cost of doing business we no longer have the luxury of
waiting."
Davis said, "at the end of the day, debit card is no longer a
free product," and debit rewards are likely to go away as well. He
said the bank hopes to recoup about half the lost revenue.
He also noted the bank may find nontraditional bank branches,
like those inside grocery stores, universities and airports, are
going to "make more sense" but other traditional branches may be
"rethought." He said the bank won't close branches.
He did note the bank will watch customers' "tolerance" and was
going to report back to Congress about the unintended consequences
created by the provision and the "long-term ramifications" for
branch banking.
-By David Benoit, Dow Jones Newswires; 212-416-2458;
david.benoit@dowjones.com
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