Phillip F. Hudson came to town last week to make a courageous pitch to Congress: Consumers will benefit from the new fees ATM owners are imposing.
The executive vice president at First Security Bank of Utah in Salt Lake City said his bank has been charging noncustomers $1.50 to use the bank's ATMs for four years.
Without the surcharge, 35% of First Security's 450 ATMs would be unprofitable and would likely be closed, he said.
"The result of ATM access fees has been greater convenience for all consumers," Mr. Hudson told the Senate Banking Committee last week. The revenue generated by these fees subsidizes free ATM use by the bank's customers, he added.
"Our experience in Utah," he said, "should serve as an excellent example of what is likely to take place in various parts of the nation as ATM owners begin to appreciate the incentive that fee income provides," Mr. Hudson told the senators.
On April 1, two big networks, Cirrus and Plus, gave ATM owners the green light to charge noncustomers a fee. But while the fees are new in much of the country, 15 states since 1989 have permitted them.
The ATM surcharges have been legal in Utah since 1992; even so, half of the ATM owners in Utah do not charge noncustomers an access fee, according to Mr. Hudson.
Still, the option to charge the fee has increased "the number of ATMs deployed ... far more than it would have otherwise," Mr. Hudson told lawmakers, adding that First Security itself has doubled its stable of ATMs.
ATMs would not be located in resort towns, airports, national parks, hospitals, train stations, hotels, shopping malls, or college campuses if banks could not charge fees, he said.
At the hearing last week, Banking Committee Chairman Alfonse M. D'Amato insisted access fees will drive small banks out of business. The theory is small bank customers will switch to banks with larger ATM networks to avoid paying the noncustomer surcharge.
Sen. D'Amato has introduced legislation barring access fees, and legislation to beef up ATM fee disclosures is pending in the House.
Mr. Hudson testified against both measures on behalf of the American Bankers Association. The Senate Banking hearing was July 11, while House Banking's financial institutions subcommittee met April 24.
Contrary to Sen. D'Amato's concern, access fees are not hurting small banks in Utah, Mr. Hudson said.
While First Security is an $8 billion-asset bank, its affiliate in Las Vegas is small. First Security Bank of Nevada has just three ATMs and while access fees have been charged since the late 1980s in that state, "we have not lost any customers," according to Mr. Hudson.
"There hasn't been any impact" on small banks, he said. "They've been able to expand their distribution network with hardly any overhead."
Craig Forsyth, chairman, president and chief executive at Western Community Bank, a $25 million-asset institution in Orem, Utah, agreed.
"The issue of the ATM is not going to drive small banks out of business in my opinion," he said. "Banks put ATMs - at quite a bit of cost - in fairly rural areas, and I think they ought to be compensated when noncustomers use them."
In an interview, Mr. Hudson described his trips to Washington as "a frustrating experience."
"The panel that supported the bill got probably three times the exposure time before the committee than the panel that opposed the bill," he said.
"I just wish Congress would examine the experience in those states that have access fees to determine if the fears of those sponsoring this legislation are justified. This is political posturing in an election year.
"Look at where it's happened, don't base action on speculation."
