Senate Panel Approves Bill But Defeats ATM Fee Ban

The Senate Banking Committee passed a broad regulatory relief bill Thursday that would allow banks to pay interest on business checking accounts and earn money on reserves at the central bank.

Before the vote, the panel rejected an amendment by the committee chairman, Alfonse M. D'Amato, that would have banned automated teller machine surcharges. Edward L. Ying-ling, chief lobbyist for the American Bankers Association, called that an important victory for the industry.

"We are very pleased to have a bipartisan vote against (surcharges) in committee because that will help us defend against it on the floor," he said. "This is an easy issue for members of Congress to demagogue" in an election year.

Separately, Sen. D'Amato said he has tentatively scheduled a committee vote for Sept. 3 on financial reform legislation that would permit cross- ownership of banking, insurance, and securities companies.

During debate on the regulatory relief bill, a proposal to let the Federal Home Loan Bank System finance business and community development lending by banks was withdrawn for lack of support. It was the second major defeat this week for community banks, which had fought hard against the bill the Senate passed expanding credit union membership.

"I had one tooth pulled yesterday, and I had another tooth pulled today," said Kenneth A. Guenther, executive vice president of the Independent Bankers Association of America. "That is how I feel."

The Banking Committee's ranking Democrat, Sen. Paul S. Sarbanes of Maryland, reiterated Treasury Department objections to the part of the reform package that would have broadened Home Loan bank investment powers.

"It will transform what I now perceive as a noncontroversial piece of legislation into a highly controversial piece of legislation," Sen. Sarbanes said.

The amendment's sponsor, Sen. Chuck Hagel, R-Neb., said Wednesday that he had enough votes to win, but he surrendered Thursday so as not to jeopardize the entire bill. He said Home Loan bank reform will have its best chance of passage this year as part of the financial reform bill.

Under the corporate checking provision, financial institutions could pay interest on business checking starting Jan. 1, 2001. In the interim, banks would be permitted to broaden the use of sweep accounts by allowing as many as 24 withdrawals per month from money market deposit accounts. Current law permits only six withdrawals per month.

Industry officials said they supported measures in the bill requiring regulators to include credit unions in their assessment of the competitive effects of proposed mergers, letting banks repurchase shares of their own stock to reduce excess capital or for other valid reasons, and allowing institutions to count a higher value of mortgage servicing rights toward regulatory capital.

The legislation also would streamline rules that permit banks to set up parent holding companies and eliminate the requirement that thrifts owned by holding companies notify regulators 30 days before paying shareholder dividends.

The bill would also eliminate a requirement that the Federal Deposit Insurance Corp. set aside monies from the thrift deposit insurance fund that exceed $1.25 for every $100 of insured deposits. The excess would be transferred to a special reserve to be tapped when the thrift fund dips below 0.625% of insured deposits.

"The regulatory relief provisions are useful but I don't see anybody turning flips over them," Mr. Guenther said in a lukewarm response typical of banking industry representatives.

Banking officials complained about provisions that were eliminated, such as regulations that would have barred tying of bank loans and insurance products, and others that were not included, such as a scaling back of call reports. Small-bank interests are also concerned that the legislation would expand the powers of nonbank banks.

The House Banking Committee's subcommittee on financial institutions has scheduled a vote on a similar bill Tuesday.

On the ATM amendment that he has championed, Sen. D'Amato, R-N.Y., said banks are making it harder for consumers to dodge surcharges. He pointed to a General Accounting Office study showing that the proportion of ATMs where cardholders have to pay an extra fee to the machine owner had soared to 79% from 17% in two years.

"The argument that consumers have choice has failed," he said, vowing to continue his fight.

He was blocked by the other nine Republicans on the panel and two Democrats who said the fees helped consumers by making it feasible for banks to deploy more ATMs. Arguing that the free market still deserved time to work, they cited GAO research showing that customers were increasingly avoiding fees by cutting back on the use of ATMs not owned by their banks.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER