by Angie Wei, California Labor Federation

Bank of America's new $5 monthly debit fee, unveiled Friday, sparked howls of protest from furious bank customers now threatening to walk away to more consumer-friendly banking options. No one knows exactly how many will follow through on the threat, but according to one poll, a $5 monthly fee will drive 66% of debit users towards alternative methods of payment—cash, credit cards, or “other.” Agree or disagree with the 66%, but at least everyone can agree that it’s good consumers can freely decide to spend however they want and bank wherever they choose, right? Wrong.

Thanks to unaffordable fees, credit checks and other obstacles, big banks have shut out about a million California households from access to any banking services whatsoever. These “unbanked” workers, unable to receive direct deposit, have in recent years found employers replacing paper paychecks with mysterious “payroll debit” cards—electronic cards that charge massive fees only a banking lobbyist could love. Employers issue cards directly to workers, wages are loaded onto an account managed by the bank, and every payday, the nickel and diming begins anew.

Workers unable to afford paycard fees don’t get to just take their business elsewhere. Unlike typical bank customers, these workers are simply stuck with whatever bank the employer chooses, and this lack of consumer choice creates a market distortion with a predictable result: sky-high fees that no retail banking consumer would ever accept.

Here’s a quick sample of some actual fees California workers can face under these contracts: $15 per month whether a worker uses their debit card or not. Every point of sale transaction costs an additional $2 and every in-network ATM withdrawal claims another $2. Replacement cards are $35, and if fees wipe out the last of a worker’s wages, the bank can take a $45 “negative balance” penalty. Even balance inquiries are $.50 and calls to a live operator cost $3 each.

For the vast majority of us, charges this unreasonable would be more than enough to propel us into the arms of a credit union or community bank less focused on punitive fines and high fees.  But the 8% without bank accounts live and work without this alternative. These employees choose from the following options: paycard issuers, equally predatory check cashing services, or a strictly cash-based existence. Fortunately, legislation offering a fourth possibility recently passed the legislature and currently awaits action from Governor Brown.

SB 931 (Evans) would authorize payroll cards, but only when the cardholder agreements meet certain conditions. For example, the card contracts couldn’t charge fees to load a payroll card or participate in the program. Card contracts will also no longer be allowed to charge workers for access to online account information and transaction histories. SB 931 guarantees an employee’s free choice between a paper check, direct deposit, or payroll card, and establishes the right of a payroll card-compensated worker to withdraw all wages once with no fees. Workers under SB 931 are also allowed four free in-network withdrawals, one free out-of-network withdrawal, and two free point of sale transactions. Modest protections, to be sure, but even these minimal standards would mean major help for minimum wage and low-wage workers.

Though millions of California workers need SB 931’s protection, the issue’s prominence and this bill’s reach extend far beyond California. Nationwide, all eyes are on our state to watch whether responsible regulation and a pro-worker Governor can beat back lies and threats from dozens of banking industry lobbyists. A victory here would mean renewed efforts elsewhere to protect the wages and living standards of America’s most vulnerable workers.  

The Governor here faces a clear choice—unlike workers paid on payroll cards. On one side is an industry that’s essentially declared war on the middle class, on the other is what’s left of a middle class ravaged by years of that industry’s greed. On one side are the world’s richest banks and their empty threats to abandon the gigantic California payroll card market, on the other are very real workers facing very real threats of bankruptcy, foreclosure, or worse, ironically from the hands of those very banks. Governor Brown, we’re counting on you to stand up to bankers bleeding hard earned wages from the workers on which our economic recovery will depend. We’re counting on you to sign SB 931.

Click here to send a message to the Governor in support of SB 931.

by Mitch Seaman, California Labor Federation

Forbes magazine as gutsy consumer advocate? Well, not really, but even the favored rag of corporate shills everywhere seemed stunned by Bank of America’s $5 debit fee announcement on Friday, accusing the banking behemoth of committing

a common mistake large corporations make: taking the customer for granted, holding the belief that whatever products or services they offer are unique and indispensible, so their customers will always be there.

While we agree that Bank of America’s incompetence runs rampant throughout the banking industry, by several measures of greed and arrogance, this troubled corporation stands alone. Allow us to present Bank of America with the following uniquely dubious titles:

Greediest TARP recipient: Bank of America took tens of billions of taxpayer dollars from the Troubled Asset Relief Program (TARP) in 2008. This bailout was supposed to help shore up the entire US financial system—as banks can be too big to fail but never too big to take free taxpayer money. Anyway, the terms of these loans required recipient banks to individually maintain sufficient cash to ward off a broader Wall Street meltdown. However, as last week’s Special Investigator General (SIGTARP) report confirms, Bank of America lobbied heavily to escape the program before they’d achieved the required financial reserves. Why? According to the report, Bank of America cited “…concerns including market perception and restrictions established by the Special Master for TARP Executive Compensation.” In other words, a shaky Bank of America weaseled out early to polish its image and pay executives more—jeopardizing the fiscal health of their company and the stability of our country.

Downsizer of the year: This one wasn’t even close. On September 12th, Bank of America CEO Brian Moynihan announced 30,000 layoffs—that’s more than twice the number of layoffs (13,000) declared by 2011’s second-place downsizer, pharmaceutical titan Merck & Co. Bank of America’s bombshell dropped just one month after Moynihan informed investors that “our capital levels are among the highest they’ve ever been in this institution’s history.” Maybe he’s confusing “our” capital levels with his capital levels: last year, Moynihan collected $2 million of his $10 million 2010 total compensation package. Other executives, in some cases, collected even more. Thomas Montag, head of investment banking and capital markets, will rake in $16 million for his work in 2010. Not bad for tanking one of the biggest banks the world has ever seen, though we have to wonder, how many jobs could be saved by firing these two alone?

#1 Tax Cheat: If you paid any federal income taxes at all last year, you paid more than Bank of America. In fact, unless you got a refund check bigger than $1 billion, you paid more taxes than Bank of America. It gets worse: these freeloaders paid no taxes last year and likely won’t for a long time. Chew on that next time pro-banker legislators demand we balance the budget through Social Security and Medicare cuts from middle class families.

First in Fees: All of which leads up to the latest Bank of America gaffe: the unprecedented $5 monthly debit fee slapped on any customer guilty of using his or her debit card for its intended purpose of buying things. This charge comes courtesy of a bank that for years encouraged frequent use of and zealous devotion to debit cards—mainly to help the bank rack up sky-high “interchange” fees from merchants on every card swipe. The company changed their tune, however, following federal legislation requiring that fees be “reasonable and proportional to the cost incurred by the issuer with respect to the transaction.” Apparently, despite final federal rulemaking that more than doubled the fee limit set by Congress, reasonable and proportional profits just aren’t enough for this champion profiteer—hence the shocking new fee.

While we applaud the furor over the monthly debit charge, be sure to consider this fee just the latest of many anti-consumer and anti-worker moves from the king of both. We’ll go to another surprising Forbes magazine masterpiece for the final word: “Banks aren’t our friends.” From one friend to another, we couldn’t agree more.