Several California regional banks, fighting to maintain their market share, have agreed not to surcharge for automated teller machine transactions.
The banks formed the No-Surcharge ATM Alliance in response to recent decisions by BankAmerica Corp. and Wells Fargo & Co. to impose the fees on noncustomers. Many consumers and legislators consider the fees excessive.
Though community banks from Washington to New England have been banding together to form such alliances, California's consortium boasts some fairly large financial institutions. These include $30 billion-asset Union Bank of California, owned by Bank of Tokyo-Mitsubishi Ltd., and CU Cooperative System, an association representing 300 credit unions with 1,300 ATMs.
"We see (surcharging) as a threat," said Jeff Morrow, vice president of community banking for Union Bank. With 350 ATMs, it is at risk of losing customers who switch to avoid the $1.50 fee being charged by Bank of America, Wells, and a handful of others.
Other members of the alliance are Sumitomo Bank of California, Glendale Federal Bank, Bayview Federal Bank, Sanwa Bank California, and Coast Federal Bank.
"We're not a Goliath in the marketplace, like Bank of America and Wells," said Sumitomo executive vice president Ole B. Larsen. "If we start surcharging, people will go elsewhere."
Banks that join the alliance can offer customers a no-surcharge ATM network comparable in size to Wells Fargo's and Bank of America's-2,000 machines versus 3,000 and 4,000, respectively. There are 15,000 ATMs in the state.
Mr. Larsen said he was confident that most of California's smaller institutions would join the alliance.
Battle lines were drawn last April when Visa and MasterCard lifted their bans against surcharging for transactions on their Plus and Cirrus networks. ATM deployers were then free to impose the fees-typically $1 to $2-on noncustomers.
"We think it's a strategic mistake for the industry to surcharge for ATM transactions," Mr. Morrow said. "We should continue to make low-cost access to a customer's own funds available via the ATM networks built for that purpose."
Even so, said William G. Raymond, a senior vice president at Bank of America, "competition can effectively manage the price of ATM services." He called the alliance "a beautiful thing. It's evidence that the free market continues to work to establish alternatives for consumers."
A Wells Fargo spokeswoman said the bank is "following an industry trend. We regard it as a convenience fee."
What the big banks fear most is legislation from politicians like Sen. Alfonse D'Amato, R-N.Y., that would ban surcharges outright. State legislatures, including those in California and Washington, also are considering bills to ban or regulate the fees.
Some observers have said the fees could generate hundreds of millions of dollars annually for banks. Legislators insist that surcharging is price- gouging. Banks are already paid about 50 cents for "foreign" transactions through regional ATM networks.
John Stafford, a spokesman for the California Bankers Association, said the state's banks are unified in opposing government interference in ATM pricing decisions.
"The last thing the alliance wants to see is a government ban," said Mr. Stafford. "They've taken a position they think will give them a marketing edge."
Consumers seeking to avoid surcharges can look for a special decal on participating ATMs. "Remember the 'Ghostbusters' movie?" asked Mr. Larsen. "Our logo looks just like that, except you take the ghost out and put 'surcharge' behind the big red slash."
