Industry adjusting to ‘new normal

BOULDER – Colorado banks will lose an estimated $200 million in revenue annually because of the Durbin Amendment that went into effect on Oct. 1, according to the Colorado Bankers Association.

Locally, bankers say they’ve made a variety of plans to make up for potential lost revenue from the Durbin Amendment, which is a piece of the Wall Street Reform and Consumer Protection Act passed by Congress and signed into law in July 2010.

The legislation also is referred to as the Dodd-Frank bill, because it was introduced in the House of Representatives by Barney Frank and in the Senate Banking Committee by Chairman Chris Dodd. The Durbin Amendment is named after Sen. Dick Durbin.

Durbin limits banks to charging 21 cents per transaction, plus five basis points, multiplied by the total transaction amount on all debit card interchange fees. Nationally, large banks will lose an estimated $14 billion in revenue annually from Durbin, based on industry estimates.

Dodd-Frank is a financial regulatory reform bill that requires reams of new paperwork for the banks, many in the industry say. At the Colorado Bankers Association, there’s a stack of paper more than six-feet tall spelling out all of the new rules, said Mary Jane Rogers, a spokeswoman for the 14 Chase Bank branches in the Boulder Valley as well as Chase in Colorado.

“It’s pretty dramatic. (The bill) touches every facet of the banking industry,” Rogers said. “The industry is adjusting to the ‘new normal.’ “

FirstBank locations in the Boulder Valley and around the region were consolidated into FirstBank Holding Co. in Lakewood in 2010 in connection with Dodd-Frank’s passing, bank officials said at the time. FirstBank has 11 locations in the Boulder Valley and more than 125 locations in Colorado, Arizona and California.

FirstBank plans to grow its customer base this year to offset the potential loss in interchange fee revenue, said Brian Larson, FirstBank of Boulder president. The bank plans to tout its free checking accounts as one way to draw new customers, Larson said, as some other banks decide to start charging customer fees to for checking accounts.

“The biggest impact that we’ve been preparing for is the reduction in debit card fees, and that’s implemented and done,” Larson said. “We’ll build on our idea of still offering free checking, and try to increase our market share.”

Great Western Bank also continues to offer free checking, said John Rogers, a spokesman for the bank, which has eight branches in the Boulder Valley. The bank also plans to offer a mobile phone device banking application, which is expected to draw in new customers and more market share, Rogers said.

The bank also wants to make more loans this year to help generate new revenue, Rogers said. Small-business owners are a potential target. And bankers also will look for ways to cut expenses from their budgets, he said.

“We are well-capitalized, and with that capitalization, we’re looking for loans,” Rogers said. “If loan demand was a little higher, it would offset the higher cost of the Durbin Amendment.”

New York-based Chase & Co. is focused locally and nationally on getting more business from its existing customers, which creates more value for both the customers and the bank, Rogers said. Chase has 16 locations in the Boulder Valley. The bank has fees ranging from $6 to $12 per month on some of checking account products but does not charge debit card fees, Rogers has said.

“We know there are still rules being made, so the devil is in the details,” Rogers said. “We’re fortunate to be well-capitalized.”

Bill Farrell, Boulder market president for Wells Fargo Banks referred questions about Durbin to the Colorado Bankers Association, the industry trade group that came up with the negative revenue estimate.

While Durbin is sure to have a negative impact, it’s too soon to tell just how negative it will be, said Don Childears, president of the trade group. Legislators may have meant for Durbin to create savings for consumers, but that’s not necessarily happening, he said.

“A recent report shows that consumers are actually paying more for certain items since the interchange law started to benefit big-box retailers three months ago,” Childears said.

U.S. Bank branches in Boulder County and in Colorado continue to grow, despite Durbin and the Dodd-Frank Act, said Amy Frantti, a national spokeswoman for U.S. Bancorp. Some 85 employees worked at U.S. Bank’s 14 branches in Boulder County at the end of 2011, compared with 76 employees at the end of 2010. The bank also plans to open a new branch in Boulder County in 2012, Frantti said.

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