News

New spin on the surcharge debate

The good news: Rep. Robert Andrews of New Jersey thinks outright surcharge bans are too extreme. The bad news: he wants to ban surcharging at ATMs that display paid advertising.

January 7, 2002

Rep. Robert Andrews thinks some ATM regulations are too extreme.

Andrews said that outright surcharge bans, such as those adopted and then overturned last year in the California cities of San Francisco and Santa Monica, are "problematic" because they could cause ATM operators to remove machines from low-income areas that can ill afford to lose them.

However, the New Jersey Democrat believes the free market doesn't work as well as it should in an environment in which big bank mergers have become increasingly common. Unhappy consumers trying to avoid fees have fewer choices as the number of banks dwindle, he said.

Andrews called his proposal, which would ban operators of any ATM that displays paid advertising from collecting a convenience fee, "a fair compromise."

Kurt Helwig, executive director of the Electronic Funds Transfer Association, disagrees. "It's clearly anti-competitive," he said.

Helwig believes that the advertising angle is a bid to bring attention to an issue that has been steadily losing steam since 1998, when former Sen. Alfonse D'Amato, onetime chairman of the Senate Banking Committee and a noted surcharge foe, lost his bid for re-election.

"There's enough of a twist to (Andrews' proposal), I think, to separate him from the other anti-surcharge folks and maybe get a headline somewhere," Helwig said.

While Andrews acknowledged that only a few ATM operators have run successful paid advertising campaigns on their machines, he said he thinks that ATM advertising is "the wave of the future."

David Moritz, president of Secora, a St. Louis-based ATM advertising company, said that imposing this kind of regulation on advertising could pose a logistical challenge for ATM operators.

Noting that ad campaigns typically run for 30-day or 60-day periods, Moritz said it might be difficult to get ATM screens switched in a timely manner to reflect whether or not fees would be assessed. "You'd have to get the processor involved, and it could get complicated."

Moritz is confident that the free market will do its job as advertising becomes a more profitable option for ATM operators.

"At least let us get (ATM advertising) to the next level before you slam it," he said. "In time, when significant revenues are generated, then we'll see what we can do. Chances are, ATM owners will cut fees on their own when that happens to generate traffic to their machines."

While the proposal only specifically mentions advertising, Andrews said it would apply "in principle" to all forms of revenue generation other than the surcharge. "I think it should cover all transactions for which the ATM operator receives some form of payment. If you're making money off the ATM, it should negate the need for a fee."

Andrews introduced the proposal, House Resolution 1047, on March 15 and it was referred to the House Financial Services Committee 11 days later. The proposal is currently idle, but Andrews hopes to see some action on it this year. He thinks it stands a better chance of making it out of committee if it's attached to a larger piece of legislation.

Bill Caruso, Andrews' press secretary, said that a member of the Financial Services Committee could decide on his own to include Andrews' proposal in an appropriate piece of legislation, or Andrews could lobby members of the committee to do so.

"(Rep. Andrews) has been quite successful getting smaller proposals passed as parts of larger bills rather than as stand-alone legislation," Caruso said.

Helwig isn't surprised that Andrews wants to attach his proposal to another piece of legislation.

"He knows he won't even get a hearing otherwise. It's a great issue for a politician to trot out every so often, but it's one they've shown they can't win," Helwig said. "It's not education, it's not Social Security – I don't think it's a priority for most legislators."

Many politicians have become reluctant to support anti-surcharge proposals as the courts continue to strike down bans, Helwig said. In the past year alone, judges reversed municipal bans in San Francisco, Santa Monica and the New Jersey communities of Newark and Woodbridge Township.

In 1999, a four-year ban on surcharging in Connecticut fell after the state Supreme Court ruled against it. Five national banks last month filed a lawsuit in federal district court seeking to lift a ban in Iowa, the only remaining state where surcharging is prohibited.