STRATEGIC PARTNERS
This November San Francisco residents will get a chance to vote on whether to ban ATM surcharges. by Ann All, editor
September 9, 1999
The issue of ATM surcharges will go before voters in San Francisco on Nov. 2, a prospect that has consumer groups cautiously optimistic and bankers more than a little concerned. The California Public Interest Research Group gathered 17,050 signatures from San Francisco residents, far more than the 10,510 required to put it on the ballot. Jon Golinger, consumer program director for CalPIRG, said the issue was still fresh in voters' minds, because the city's Board of Supervisors tabled a similar measure last February. Calling the board's action "a slap in the face of democracy," Golinger said, "The disconnect between what the people want and what the politicians have been willing to do is enormous." Like the earlier tabled proposal, this measure would ban surcharges at machines owned by banks but would exclude independently owned ATMs. That exclusion is "unconstitutional," said John Stafford, vice president and director of communications for the California Bankers Association. "It discriminates against financial institutions." Golinger contends that some of California's biggest banks are using the surcharge as a way of stealing customers from smaller institutions. He said at least two banks are running ads on ATM screens and billboards inviting consumers unhappy about paying access fees at their machines to open accounts with them. When a similar measure was introduced at the state level in 1997, opponents defeated it by arguing that consumers had a choice. Because of mergers by several large banks, including Wells Fargo and Bank of America, Golinger said that's no longer the case. "Because of all the merger activity, Californians have less control over their money. In one sense, this is a way for them to take that control back," he said. Stafford said consumers still have plenty of ways to get cash for free, including POS terminals."They also have the choice to pay or not pay at a foreign ATM," he added."At least in California, the access fee is fully disclosed, and lots of people cancel when they realize they'll have to pay." A study conducted by the U.S. Public Interest Research Group found that 93 percent of banks levied the fees last March, up from 71 percent a year ago and 45 percent in 1997. Even many of the smallest banks and credit unions, which had rejected surcharging at first, have adopted the fees. "The more it's a fact of life, the harder it gets for small banks or credit unions to do the right thing," Golinger said. "When you impose a surcharge, your customers don't pay more, other customers pay more. There really is no financial incentive not to surcharge." According to a study just released by the Federal Reserve, all ATM fees are on the rise. Surcharges in 1998 increased an average of 6 cents, to $1.20. The "foreign" fees that banks charge their own customers for using another bank's ATM increased an average of 4 cents to 7 cents, to $1.10. Golinger said more and more ATM users feel "it is somehow inappropriate for them to by paying twice to get their own money out of an ATM once." Stafford maintains that both financial institutions involved in foreign transactions should be reimbursed. "The foreign fee goes to one, the access fee to the other," he said. "They both have their own sets of costs and considerations." In a poll of 600 San Franciscans conducted by CalPIRG, nearly 80 percent of respondents said they would vote for a law banning surcharges. Stafford isn't surprised by that figure. "Given a choice between paying for a service and getting it for free, who would choose to pay? Obviously you're going to get a large degree of support for free anything," he said. Noting that similar initiatives have been rejected twice at the state level in California, as well as in 23 other states and at the federal level, Stafford said, "I think the fact they're taking this issue before the electorate in America's most liberal city is an indication of the desperation that proponents of these kinds of measures are experiencing." The city's Department of Elections must verify the signatures on the petition, a process that should be complete by the first week of August. Barring any unforeseen circumstances, voters will see the issue on the ballot in November. If 51 percent of them approve it, the measure will become law. Golinger expects a tough fight from the well-funded bank lobby but thinks the proposed ban has a good chance of passing. It could set an important precedent, he said. "It means that voters and city councils and local governments in other parts of the country can do this." If the measure passes, Stafford said the CBA will challenge it in court. He believes that federally-chartered banks would be exempt from any municipal measures. Member banks will likely ask for "injunctive relief," he added, "so that while this is wending its way through the courts, banks could continue business as usual."
