Fleet Financial Group and First Union Corp. presented arguments in a Connecticut court Monday seeking reversal of a state ban on automated teller machine fees.

State Superior Court Judge Samuel H. Teller said he would rule on the banks' request by week's end.

The hearing was the latest of a series of skirmishes over the state banking regulator's 1995 interpretation of a 1976 law. A September legal victory for the major banks led them to begin surcharging. This month an appeals court reversed the decision, forcing the banks to stop.

Connecticut and Iowa are the only states that prohibit surcharging. Fleet claims the Connecticut law is costing it $15,000 a day in unrecoverable fees; First Union Corp., which also claims hardship, joined in Fleet's appeal.

Around the country, most public officials who supported fee prohibitions as a pro-consumer issue have thrown in the towel. The reelection defeat of Senate Banking Committee Chairman Alfonse M. D'Amato, R-N.Y., who championed the cause, has made it unlikely that national anti-surcharge legislation will be considered.

But Connecticut Banking Commissioner John P. Burke is not about to let it die.

"The law in the state of Connecticut that enables banks to own ATMs-in my judgment-precludes them the ability to charge," Mr. Burke said in an interview.

He said he has "taken no position on the morality" of ATM surcharges.

Mr. Burke has scheduled an administrative hearing for Dec. 3, when he will hear arguments about whether banks should be permitted to surcharge permanently. But ultimately the matter is likely to be decided in court.

As in neighboring Massachusetts, where an anti-surcharge legislative proposal died in July, Connecticut's Senate rejected bills in 1997 and 1998 to ban surcharges. Thus, the commissioner's ruling is where the matter stands.

Fleet and First Union, which have a combined 461 ATMs in Connecticut, have joined forces on the other side. BankBoston Corp., with 109 ATMs in Connecticut, has not filed suit against the commissioner.

It was Fleet's 1997 lawsuit-filed in federal court in Hartford and later moved to New Haven-that got the ball rolling. That court ruled in Fleet's favor on Sept. 30, and the banks started surcharging in October.

The state quickly appealed the decision. Though the higher court removed a stay on the District Court's decision, it ultimately ruled that it did not have jurisdiction over the matter.

On Nov. 10, a day after the issue was remanded to state court, Mr. Burke issued a cease-and-desist order on surcharging.

Monday's arguments concerned only whether the banks had the right to surcharge until the Dec. 3 hearing. Among the issues raised was whether the banks, if surcharges are struck down, would be able to refund the fees assessed during the period leading up to the hearing.

Judge Teller also heard the banks' disagreements with Mr. Burke's reading of state law.

"We have a situation here where a bank clearly has the right to assess fees," said Donald E. Frechette, a lawyer for Edwards & Angell, a Hartford firm representing First Union. "It's putting the cart before the horse to ask Fleet and First Union to show that they are suffering irreparable harm."

Connecticut Attorney General Richard Blumenthal said the state has a right to enforce its law, which is aimed at preventing consumers from leaving small banks for larger ones with bigger ATM bases.

Mr. Burke said, "I'm not attempting to establish any kind of price management or control."

To cover all fronts, Fleet and First Union have challenged Mr. Burke's injunction in both state and federal courts.

"We will continue to pursue this through various possible legal steps," said James Schepker, a spokesman for Fleet.

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