This post is from staff writer April Dykman.

Last year Congress passed the massive Dodd-Frank bill as a response to the reckless actions of Wall Street and to establish protections for consumers. But some of the new regulations will cost banks significant revenue, and stories are running rampant on proposals banks are considering to recoup costs — each at the consumer’s expense.

The following are some of the changes that are already taking place at a bank near you, as well as proposed changes banks are considering.

Free checking on the endangered list
Free checking is harder to come by, as banking giants like Wells Fargo begin charging for new accounts and Bank of America announces plans to introduce fees over the next two years. Banks say that overdraft charges and other penalties, which are restricted under the new regulations, paid for checking account maintenance costs and enabled banks to offer free checking.

Customers who are able to meet certain requirements — such as maintaining a minimum balance, making a certain number of debit card transactions, or making a minimum monthly deposit — can have the fee waived. Those who can’t qualify, most likely poor and moderate-income customers, might pay as much as $30 per month in checking account fees.

Debit card charges, restrictions
Last week, CNN reported that banks are considering a spending limit of $50 or $100 on debit cards because of a regulation to restrict interchange fees.

Interchange fees are charged to merchants by banks and shared by the bank’s partners. Reform rules, which would go into effect this July, would lower the fee from 44 cents per transaction to a proposed 12 cents, costing JPMorgan Chase, for example, more than $1 billion annually. Banks say the fees are used to offset losses from fraud, so restricting the amount per transaction would lower risk for the bank.

In addition, banks like Chase have started to experiment with monthly fees on debit cards in some states and have closed enrollment for debit card rewards programs.

Additional fees introduced
Some banks also have introduced a variety of other new fees, such as:

  • Monthly charges for paper statements and in-person customer service
  • New annual fees, ranging from $29 to $99, for credit cards
  • Fees for images of canceled checks
  • $10 per transfer to use your savings account for overdraft protection
  • New annual fees for new credit lines, plus a daily use fee

Other banks are testing the waters in certain market segments, or charging fees for new customers with plans to expand to existing customers over time.

Community banks feel the pinch
Community banks and credit unions, often loved by their members for low fees, high-interest savings accounts, and free checking, also are concerned about the effects of the new regulations.

This month, community bank representatives testified at a House Financial Services subcommittee hearing that they are struggling to conform with new rules from the Consumer Financial Protection Bureau (CFPB), created by the Dodd-Frank Act. The CFPB, scheduled to start in July, will have authority over institutions that offer credit cards, mortgages, student loans, and payday loans.

“This new bureaucracy…will certainly impose new obligations on community banks…that had nothing to do with the financial crisis and already have a long history of serving consumers fairly in a competitive environment,” SpiritBank Chief Executive Albert Kelly, Jr. wrote in his testimony.

The representatives testified that the volume of regulations (5,000 pages regulations and reporting requirements, plus 50 rules added or modified over the last two years) places a unfair burden on smaller financial institutions. The CFPB also can audit at its discretion on a “sampling basis,” adding to resources required of community banks.

The cap on interchange income also affects the small banks, as their debit cards won’t be able to compete with the big banks if the big banks are required to lower their fees.

Consumers skeptical of reform benefits, says report
While financial reform was billed as beneficial to the consumer, a new report by Javelin Strategy & Research finds that the public is skeptical.

Of those surveyed, 60% said they will switch to an alternative payment method if their bank starts to charge for debit card use. Two-thirds of consumers don’t believe that a reduction in interchange fees for merchants will translate into lower retail prices for consumers, says Javelin.

Some argue that the benefits of reform still outweigh the costs. It introduced regulations that penalize lenders for making irresponsible loans, eliminated mortgage prepayment penalties, and required lenders to give borrowers their credit score when they’re rejected for a loan. Some consumer groups argue that the new, upfront monthly fees and charges are still preferable to overdraft charges and penalties that usually hit poor and moderate-income customers hardest.

What do you think? Are you concerned that the financial reform will change how you bank? Would you switch from debit to another payment method if you’re charged a fee or capped at $50 per transaction?

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