Harkin Amendment draws fire from industry groups

Harkin Amendment draws fire from industry groups
Tags: ATM Industry Association (ATMIA), Regulatory Issues
May 14, 2010 - Matt Cunningham

"This one is a bridge too far."

"It's just very misguided."

ATMIA CEO Mike Lee and EFTA president and CEO Kurt Helwig, respectively, are only two of many figures in the ATM and banking industries raising the alarm over a proposal to cap ATM user fees at 50 cents per transactions. The legislation, known as the Harkin Financial Reform Amendment, has generated a level of industry buzz not heard since 1996, when regulations were changed to allow deployers to charge the interchange fees now imperiled.

Sen. Tom Harkin (D-Iowa) announced his amendment by attacking the fees in a May 4 press release. He called the level of fees now common to ATM transactions "outrageous" and "anti-consumer."

"Our mission in financial reform is to level the playing field for the average Joe," Harkin said. "My amendment goes to the heart of that mission, ensuring consumers are no longer victimized by unfair fees."

Not surprisingly, Helwig and others disagree with the characterization. He argues that the amendment itself is anti-consumer, since limited ATM fees would make remote off-property ATMs unprofitable and would likely reduce the number of them available to consumers.

In a letter opposing the amendment, the American Bankers Association wrote, "While [an ATM fee cap] sounds attractive, the reality is that such a price control will make many ATMs uneconomical and will lead to a dramatic reduction in the number and availability of these terminals and stop any production and distribution of new terminals. This will mean greater inconvenience for consumers and fewer choices."

Helwig suggests that if ATM fees were exorbitant, market demand would have already forced deployers to lower them. "Consumers have shown they demand convenience and are willing to pay for convenience," he said.

A spokesperson for Harkin said the "costs no longer bear relation to the cost of processing transactions." The senator's figures peg the cost of processing a transaction to about 36 cents.

Helwig said the estimate comes from a 1997 report.

"It's particularly dated," he said, "and doesn't take into account the cost components of an ATM." The cost of off-premise rental, machine maintenance and armored car service for cash-handling all add additional costs beyond Harkin's estimate.

Lee reports that a 2006 ATM deployer study by the Star Network calculated the cost-per-transaction for independent service operators (ISOs) at $1.75 per transaction, nearly five time Harkin's estimate.

Prospects

Harkin spokesperson Bergen Kenny said Harkin and his co-sponsors, sponsors Charles Schumer (D-NY) and Bernie Sanders (I-VT), hope to have the amendment on the Senate floor in the next few days.

Helwig, however, says he's optimistic that the amendment may not reach the Senate floor, given the looming Memorial Day recess.

"I'm hoping they won't even get a vote on it," he said, noting that discussions and debate on Senate Bill 3217, the parent bill for the amendment, have yet to begin. "There hasn't even been a hearing."

But according to Kenny, the amendment may have a desired effect on ATM fees even if it never becomes law.

"We've got some good sponsors," she said. "Even if it fails, we've started the discussion."