Bank of America winds down credit protection

Bank of America has decided to wind down two revenue-generating consumer programs that have been pilloried by regulators.

Specifically, the bank will end its Credit Protection Plus and Credit Protection Deluxe, which give customers the right to suspend payments selectively (they were marketed as an individual safety net), to new customers this month, though it will continuing to offer the service to existing cardholders who have signed up. Fees typically range from 85 cents to $1.35 per $100 of outstanding balance each month for these programs.

According to Dow Jones, Bank of America charged 85 cents for every $100 of customer's balance. The bank has already agreed to pay $20 million to settle a class-action lawsuit alleging it mis-marketed payment-protection products to customers who didn't really need them. The move also comes on the heel of the CFPB's $210 million settlement with Capital One over similar products.

Other banks, such as JPMorgan Chase, have already stopped these programs, also called debt-cancellation programs. These programs collectively generated nearly $3.0 billion in revenue in 2009. The move by Bank of America highlights the on-going consumer banking revenue conundrum. Regulations have taken a toll on the top line. The Durbin Amendment stands as the best example of this.

There could be more regulation-driven revenue challenges ahead, especially as the CFPB turns its attentions to credit cards. Banks need to innovate to offset the revenue losses, but few have been able to do so. The question remains: what's next?

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