ATM Charges Raise Ruckus

Consumer Groups On The March
Now that Know Your Customer legislation has proven to be vulnerable, consumer groups are on the move again, this time attacking financial institutions' ATM fees.

All of the states presently allow charges for customer and/or non-customer use of ATMs, with the exception of Connecticut and Utah, both of which had laws on the books before our ATM systems were developed. However, both states currently have cases in the courts where the banking industry is challenging those laws.

Want A Charge?
California is taking the lead in attacking ATM fees by including it on the ballot, asking voters to decide whether to outlaw fees on ATMs in that state. As one person said, it was pretty much of a no-brainer to ask voters whether or not they want to be charged.

The Defense Department is considering a ban on ATM fees on military bases. And numerous other municipalities are waiting to see the outcome of current anti-ATM fee activity before attempting to ban fees in their jurisdictions.

One quarter of world's ATMs here
It is estimated there are over 800,000 ATMs worldwide. Twenty-six percent of these machines, or about 208,000, are in the United States. The U.S. Office of Thrift Supervision said recently that the average ATM transaction costs banks 27 cents. Teller transactions, on the other hand, cost up to $2.93, according to OTS.

The activity of groups such as the one leading the movement against ATM charges in California, the California Public Interest Research Group, seems at direct odds with surveys done by other reputable organizations.

The Merchant Service Group reports their findings are that 61 percent of consumers are willing to accept ATM surcharges. They also found that debit card transactions are growing at a rate of 40 percent a year.

In-Store ATMs popular
Retailers report ATM customers spend 20 to 25 percent more money in the store than non-ATM customers. They have also learned that the cost for the merchant to process a cash transaction is about 7 cents, while a check costs 43 cents and a credit card 80 cents. In-store ATMs are, understandably, popular.With the cost of ATMs falling (you can purchase a simple give-out-cash machine for about $5,000), we're going to see the number of ATMs in retail locations increasing considerably. Which makes the issue of charging and surcharging an important one for the financial industry.

Banks Defend Charges
Banks have defended the charges, which average $1.20 according to a study done in 1998 by the Federal Reserve, not the $3 or $4 each claimed by the California group. And with many of the new, sophisticated machines providing "extras", there is even more value for the use of the ATM. Cashing checks, selling stamps, money orders, and phone cards, accepting wires, paying bills, accepting debit cards, credit cards and electronic benefit transfer cards - all are services now available through new ATMs. Customers do not expect this kind of convenience free of charge. Congress has, up to now, refused to ban the surcharges with federal legislation.

It's Up To The Courts
The fate of ATM charges is not in the hands of voters or banks. It will be in the hands of the courts. Already challenged in the two states where the laws have been on the books for many years, it will also be the subject of lawsuits in those states now attempting to outlaw them.

Copyright © 1999 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 9, No. 9, 10/99