Will Bank Transfer Day matter?
In what might well prove to be one of the most significant real world consequences of the Occupy Wall Street movement, tens of thousands of Facebook members have pledged online that they intend to shift their deposits this coming Saturday (Nov. 5, also known as Guy Fawkes Day) from major banks to nonprofit credit unions.
While staying mindful of the truism that online petitions typically aren’t worth the paper they aren’t written on, the Bank Transfer Day movement does seem to be building steam. The general public’s dissatisfaction with mega-banks has been growing in the years since the Troubled Asset Relief Program was first passed. That could provide the kindling that, mixed with the most recent spark – the announcement by a handful of banks that they would begin charging fees for use of the institutions’ debit cards – just might prove sufficient for a real blaze.
The proposed debit card fees come in response to implementation of the so-called “Durbin rule,” a provision of the Dodd-Frank Act that capped the amounts major banks could charge to retailers in “swipe fees” for use of their interchange networks. With the backing of big retailers like Wal-Mart and Target, Congress mandated that banks with more than $10 billion in assets may not charge retailers more than 19 cents per debit card transaction. Previously, those fees were largely hidden in the prices of retail goods.
Banks subject to the Durbin rule have been seeking other ways to make up for that lost interchange fee revenue, and charging user fees on debit cards is just one experiment in that area. There is evidence the experiment has already failed, as the largest bank to propose the fees, Bank of America, has beat a hasty retreat and canceled that plan. Reuters columnist Felix Salmon has even suggested that, in the current environment, some banks might be perfectly content to see the retail business go:
(T)he big banks don’t particularly want all those retail-deposit funds — they’re getting precious little interest on them, and they come with all manner of expensive obligations to mail out statements and provide smiling service at teller windows and generally do the whole customer-service thing, which as we all know big banks are very bad at. Historically, they’ve done what they have to do on that front because they’ve been able to extract all manner of overdraft fees and interchange fees and the like, but that fee income is shrinking now, thanks to Dodd-Frank, and the fact is that millions of small bank accounts are actually unprofitable now for the big banks, and those banks won’t shed many tears if those customers go off to a credit union instead.
For their part, while credit unions may not have started the BTD movement, they are being proactive in looking to take advantage of it. Some have placed ads in local newspapers that cite the recent debit card fee announcements as a reason to make the switch, and many are scheduling special promotions and extended Saturday hours for Nov. 5 specifically to draw in Bank Transfer Day clients. The National Association of Federal Credit Unions reports it has seen a 350% increase in visits to its online credit union locator, CUlookup.com, in just the past month.
That’s just good business sense, and no one should begrudge the credit unions the opportunity to appeal to consumer sentiment. Nonetheless, there does seem to be something odd about the movement, not the least its bizarre invocation of the iconography of the 17th Century English terrorist Guy Fawkes as a kind of mascot for the cause.
The BTD organizers’ references to Fawkes come on the heels of the recent use of the Guy Fawkes mask by the Occupy Wall Street protestors, which itself has something of a twisted and convoluted history. The particular style of Guy Fawkes mask used by the protestors is one drawn from the main character in the 2006 film “V for Vendetta,” which means its recent upsurge in popularity has meant the protestors are inadvertently boosting intellectual property revenues for the corporate behemoth Time Warner. The film is based on a 1980s series of comic books by the British writer Alan Moore which portrayed a dystopian fascist England and featured a masked, morally ambiguous anarchist protagonist named “V” who plotted to complete Guy Fawkes’ goal of blowing up Parliament.
The original graphic novel is considered a classic of the genre. The film adaptation was released to mixed reviews and middling box office numbers. But V’s mask, based on those used in Bonfire Day celebrations for centuries, took on a new life when it was adapted for use as an avatar and signature file on the hacker website 4chan and, later, by members of the “hacktivist” group Anonymous, particularly in their staged protests of the Church of Scientology.
To recap, the Guy Fawkes mask moved from Bonfire Day celebrations to use in a comic book to use in a mostly ignored film to use on a hacker website to use by a hacker group to use by OWS protestors to, ultimately, use by a Facebook movement urging people to move their funds to credit unions on Guy Fawkes Day.
And what does Guy Fawkes have to do with credit unions? Absolutely nothing, as far as I can tell.
Guy Fawkes, the historical figure, was certainly no anarchist. He and his co-conspirators wanted to blow up the House of Lords in hopes of killing all potential Protestant claimants to the English throne and securing succession for a Roman Catholic: King James I’s nine-year-old daughter Elizabeth of Bohemia. The Bank Transfer Day organizers’ juxtaposition of coloring the Guy Fawkes mask with the outlines of an American flag (the Gunpowder Plot predated the founding of the Jamestown colony by two years, and the American Revolution by 171 years) is an even more bizarre mixture of symbols.
But perhaps most bizarre of all is citing banks’ reaction to the Durbin rule as a reason to make the jump to credit unions. There is a very simple explanation for why you won’t see credit unions proposing debit card fees in response to the Durbin rule: It doesn’t actually apply to them.
Let’s be clear, there are many good reasons to join a credit union. Credit unions’ checking, overdraft and other fees tend to be lower than those of many large banks. They also historically have charged much lower interest rates on many personal loans, such as auto finance loans. In part, credit unions can do this because they have no shareholders to please, and thus revenues flow back to union members. Another significant consideration is that, as nonprofit institutions, credit unions enjoy tax advantages that lower their costs.
Credit unions also are local institutions, frequently involved in local charities and many report they provide better customer service. They also offer members the upside potential of dividends, something you certainly won’t get as a depositor in a major bank. All of these are good things.
But when it comes to interchange fees, while Bank of America, J.P. MorganChase, Wells Fargo, Citigroup and the other major banks are now subject to caps on the fees they charge to retailers, credit unions are still permitted to charge whatever they like. That’s because, during the drafting of Dodd-Frank, lobbyists for the credit unions and for small community banks were able to convince Congress to carve out an exemption for them. As written, the Durbin rule only applies to banks with more than $10 billion in assets.
So, yes, while there are many good reasons to join a credit union, rewarding their lobbying prowess probably shouldn’t be one of them.
