Amid a consumer backlash that went as high as the White House, Bank of America on Tuesday became the latest bank to scrap plans to charge customers a monthly fee to use their debit cards.
But the about-face by some of the nation's largest banks came too late to stem the exodus of some of their customers.
The controversial fees have triggered a surge in new checking-account customers for local credit unions and community banks.
Coastal Federal Credit Union, which has 15 Triangle branches, landed 1,800 new checking accounts in October, more than double the amount of a typical month.
"It's been an absolutely wild October," said Joe Mecca, spokesman for Coastal Federal Credit Union. Credit unions are cooperatives that are owned by their members.
Consumer resentment against the fees is so great, in fact, that it triggered a viral, grassroots movement that calls for bank customers to shift their money to credit unions and community banks on Saturday, which has been dubbed "Bank Transfer Day."
But now that the banking giants have backed off from the fees in recent days, it remains to be seen whether customers will continue to move their accounts.
Tony Plath, a finance professor at UNC Charlotte, speculates that the big banks could continue to lose customers, but he expects the pace will slow down.
Switching may slow
He said that the banks misjudged their customers when they devised the fees; they expected their best customers to complain a bit but ultimately shrug off the fees because of the hassle involved in switching accounts. Many customers automatically pay mortgages and other monthly bills from their accounts and have their paychecks directly deposited into their accounts.
But the outrage went as high as Washington with President Barack Obama suggesting that the government could crack down on fees and U.S. Rep. Brad Miller, a Raleigh Democrat, introducing legislation to make it easier to switch banks.
"They started losing lots and lots and lots of good customers," said Plath, "people that had high average balances, people that had multiple accounts with the bank, people they didn't want to lose."
Plath said the banks' consumer behavior models are obsolete because they don't account for a major shift in the public's attitude in the wake of the recession.
"They don't like big banks anymore," he said.
The new charges were concocted in the wake of new federal regulations that took effect Oct. 1 that slashed the fees banks can charge retailers for processing purchases made with debit cards.
Customer attitude shift
In announcing its change of heart on Tuesday, Charlotte-based Bank of America cited negative reactions from consumers and the changing competitive landscape. The latter was a reference to recent decisions by Wells Fargo, SunTrust, Regions Bank and JPMorgan Chase & Co. to back off from such fees.
"It's been great free advertising for credit unions," said John Radebaugh, CEO of the N.C. Credit Union League. "I think people are realizing that, in a credit union, the profits go back to the... members, and not to Wall Street."
The mammoth State Employees Credit Union reports that it is working with 25,000 customers who are moving their accounts from elsewhere.
Meanwhile, Raleigh-based Capital Bank, which has 44 branches in the Carolinas, has seen a 30 percent surge in new checking accounts in recent months. Even Raleigh-based First Citizens Bank - whose 435 branches in 17 states puts it far beyond the community bank category - reported a 22 percent jump in checking accounts over the last three months.
"I think public opinion is now swayed to anti-big-bank," said Darlene Goldbach, senior vice president at Cary-based Crescent State Bank.
Radebaugh is optimistic that the demise of the debit-card fees won't staunch the flow.
"We kind of look at it as, well, the cat is already out of the bag," Radebaugh said.