STRATEGIC PARTNERS
As if those pesky consumer advocates aren't bad enough. The banking industry's newest opponent in the battle over surcharging is the U.S. military.by Ann All, editor
December 2, 1999
The U.S. military has joined the ranks of those interested in eliminating surcharges at the ATM. Last August, the Defense Department proposed a new rule that would prohibit banks operating on military bases from imposing the fees. After collecting comment from banks, consumer groups and other interested parties, the proposal is now being discussed internally. Department spokesman Glenn Flood said the department hopes to have a decision by the end of the year, but that governmental red tape could slow the process. "We're being optimistic," he said. A new rule would affect dozens of banks, ranging in size from small credit unions to giants like Bank of America, that operate on more than 400 domestic bases. Noting that complaints from soldiers helped bring the issue to the forefront, Flood said that ATM surcharges hit soldiers and their families particularly hard when they are transferred from base to base. "Some of the lower ranks have to watch every penny, almost," he said. "They might be transferred to a different base for a few months and, all of a sudden, they have to pay a fee to get their cash." John Rasmus, the senior federal administrative counsel who filed a letter with the DOD on behalf of the American Bankers Association, countered that soldiers could choose to open a new account or maintain two accounts. "As is true in the world outside of military installations, if you access an ATM owned by your bank, there is generally no additional service fee," he said. Installing and maintaining ATMs on bases is expensive, Rasmus said, and surcharges help banks recoup their costs. A ban on surcharges would act as a "disincentive" for new deployments and might cause banks to pull existing machines, he added. While recent court decisions in Connecticut and Iowa have found that the Office of the Comptroller of the Currency is the sole regulatory authority for federally chartered banks, Rasmus acknowledged that he didn't know if that argument would stand up against the military. "I don't know if anything has ever been litigated or challenged as it relates to the OCC vis a vis the operation of one of the banks it regulates on a military installation," he said. Consumer advocates like Jon Golinger of the California Public Interest Research Group welcome the military's action. "We're happily surprised to have such a new and pretty powerful ally," he said. While opponents of surcharge bans often portray their advocates as radicals, the military's interest in the issue proves that isn't true, Golinger said. CalPIRG has been involved in several anti-surcharge efforts in California, including Santa Monica's recent passage of an ordinance banning the fees and a referendum in which San Francisco's residents voted to eliminate them. According to Flood, the military may consider a compromise, such as setting a cap on surcharges or establishing an agreement in which banks operating on bases would allow one another's customers to use ATMs without paying the fees. Because the military has wide latitude in regulating commercial activities on its bases, it could have opted to introduce a new rule without accepting comment, Flood said. "We could have done it by order or directive, but we wanted to give everybody a chance to put their concerns on the table." One bank that serves members of the military and their families may have hit on a solution to the problem. San Antonio, Texas-based USAA Federal Savings Bank rebates up to $15 a month to its customers for fees paid on their first 10 domestic ATM withdrawals. "It seems to be working well for most of our folks," said Mel Cummings, the bank's communications officer. A "branchless" bank, USAA Federal Savings serves its customers primarily through direct mail, the telephone and online banking. The bank has eight ATMs, most of which are in Texas. Its ATM fee policy was established in September of 1997 and is "part of USAA's philosophy of member service," Cummings said. "We wanted to make sure our members would have access to their funds in the easiest possible manner. That didn't necessarily include being charged by others."
