STRATEGIC PARTNERS
Even though 23 anti-surcharge measures died in 1998, new legislation was introduced in 13 states. This year's crop isn't faring much better. by Ann All, editor
March 11, 2002
The battle to ban ATM surcharges just isn't the same without its boldest warrior, former Sen. Alfonse D'Amato. If recent legislative efforts are any indication, interest in eliminating surcharges may be waning.
Yet anti-surcharge advocates aren't giving up. Instead, they're putting new spins on the issue, from targeting banks rather than ISOs to proposing surcharge caps instead of outright bans.
Federal compromise
The House Banking Committee on March 10 rejected a proposed surcharge ban, instead settling on a compromise that would require surcharges to be clearly disclosed at ATMs. It would also require banks to give consumers a chance to terminate a transaction rather than pay a fee.
Because regional and national networks have similar requirements, most banks already disclose fees and offer ATM users an "end transaction" option.
The House panel supported the disclosure measure, sponsored by Chairman Jim Leach (R-Iowa) and ranking Democrat Rep. John LaFalce of New York, by a vote of 48-1. The amendment will be attached to the Financial Services Modernization bill (HR 10), which would remove barriers between banks, securities firms and insurance companies by allowing them to merge. Unlike an earlier bill introduced by Senate Banking Committee Chairman Phil Gramm (R-Texas), the House bill has the support of the Clinton administration.
Battle by the Bay
A highly-publicized attempt to ban surcharges in San Francisco failed when the city's Board of Supervisors voted 8-3 to table it. John Stafford of the California Bankers Association said tabling the proposed ordinance "saved face for the supervisors and allowed them to say, quite legitimately, that they're saving the city from an enormously involved and costly litigation problem."
At least one supervisor, Michael Yaki, expressed concern about the legality of the proposal. Yaki noted that the Office of the Comptroller has gotten involved in several state court battles over surcharges.
The ban targeted ATMs at bank branches, but not those deployed off-site. That's only about a quarter of the city's 2,700 ATMs, but opponents said it would have established an anti-business precedent. "One of our appeals to the local business community was if they negate our ability to charge for our services today, what does that mean for them next week," Stafford said.
Board of Supervisors Chairman Tom Ammiano, who introduced the measure, said it was intended to help smaller community banks compete with giants like Wells Fargo and Bank of America. However, several members of the California Independent Bankers spoke out against it.
Craig Hudson, executive director of the Independent Bankers, said, "Mandating a prohibition in the San Francisco Police Code against ATM surcharging is an anti business and even reckless response to this issue. It is no real solution."
Ammiano vowed to push for a referendum that would bring the issue before voters next November. In the meantime, a proposed surcharge ban (SB 270) introduced by state Sen. Betty Karnette (D-Long Beach) is pending. The original bill included all ATMs, but Karnette amended the language to exclude independent deployers.
It has been referred to the Senate Committee on Finance, Investment and International Trade. While no hearing date has been set, a Karnette spokesman predicted the committee would address it in April.
Banks as the bad guys
Casting banks as greedy bad guys is an increasingly popular tactic among legislators. Like Karnette, Illinois state Rep. John Fritchey (D-Chicago) sponsored a bill that would have applied only to financial institutions. The proposed ban was killed by the House Consumer Protection Committee, but Fritchey said he plans to re-introduce it next year.
In Wisconsin, state Rep. John Lehman's (D-Racine) anti-surcharge proposal (HB 131) also would apply only to bank-owned ATMs. It's scheduled for a mid-March hearing.
Lehman believes that adjusting interchange fees is the best way to defray ATM operating costs. "Why don't banks work this out within the banking system rather than victimizing consumers?" he asked.
Lehman became involved with the issue after getting a call from a constituent who was upset when she was hit with a $1 surcharge at the bank ATM she frequented. When Lehman investigated, he was told the high-traffic machine was a "profit center" for the bank. "The banker didn't argue he needed that surcharge to make that machine operate profitably," Lehman said. "It was already making money. He just wanted more profit at that location."
Noting that a similar measure died in committee last year, Lehman said he was encouraged that his proposal got a hearing this time around. "I believe we're moving in the right direction by giving this a fair hearing. In terms of a consumer concern, this touches the heart of almost everyone to talk to."
With no Republican co-sponsors, Lehman acknowledged he faced an uphill battle in the GOP-controlled Assembly. "I know a number of Republicans who are informally very supportive of the bill, but the banking lobby is quite strong," he said. "It'll probably be like David and Goliath, but I'm looking forward to it."
The regional TYME network, which serves most of Wisconsin, takes a neutral surcharge stance. "When all of this started back in '96, we decided we'd take a position of neutrality and just do what our individual financial institution participants wanted us to do," said TYME president Jim Martin. "We accommodate surcharging alliances, we accommodate acquirers who don't want to surcharge at all, and we accommodate those who do."
Consumers have modified their ATM usage in response to widespread surcharging. Noting that just 25 percent of TYME's ATM withdrawals include a surcharge, Martin said he thinks most users seek out machines owned by their bank or patronize banks that belong to selective surcharge alliances. Both the Community Bankers Association and the Wisconsin Credit Union League sponsor such alliances.
Martin said he's seen lines of consumers waiting to use ATMs where "no fee" banners are posted. "I really believe the free market is working here."
Cash withdrawal habits have changed as well. "Our average withdrawal has gone up by more than $20 in the past year," Martin said. "What that's telling us, and it's certainly reflected in our volume, is that consumers are using ATMs less. If they're going to pay a surcharge, they're going to get more cash."
The ATM isn't the only place consumers can fill their wallets, Martin pointed out. "You can get cash back at virtually every location in our POS program, and people are using that more. You've still got good old-fashioned checks too."
Capping capitalism
If he can't eliminate surcharges, New Mexico state Sen. Leonard Tsosie wants to reduce them. His proposal would cap surcharges at 50 cents. In New Mexico, fees currently range from 75 cents to $3. Nationally, the average ATM surcharge is $1.50.
A few states already have such regulations. Caps in Arkansas, Mississippi and Wyoming range from $1 to $2.
Paul Boushelle, executive vice president of First Security Bank of New Mexico and a lobbyist for the New Mexico Bankers Association, called surcharge caps "price controls." He noted that ATMs are "purely a convenience" and asked, "If you're going to put a cap on something, why don't you do it on food, clothing and other necessities?"
The Tsosie bill would negatively impact at least one state industry, Boushelle said. "Gaming is legal here at all 13 of our Indian pueblos, and it would be a very anti business proposal to the pueblos. Realistically, I think it's going to be some time before we see anybody try to cap ATM fees here."
Tsosie may be running out of time. No hearing date has been set, and New Mexico's legislative session ends March 20.
