Banks are hammering away at the last bastion against surcharging at automated teller machines: the state of Iowa.

Though several cities have tried to block banks from charging ATM fees to noncustomers, none of the efforts has worked, with courts repeatedly invoking federal laws that let banks set their own rates. Connecticut’s attempt to ban surcharges statewide met with the same fate, leaving Iowa as the only state where a rule against surcharging has survived.

A lawsuit filed in April by four banking companies against the Iowa superintendent of banking may settle the matter once and for all. Previous efforts by cities and states to get rid of ATM fees have put banks on the defensive, but this time the banks are on the attack.

The suit was filed in U.S. District Court for the Southern District of Iowa by Wells Fargo & Co.; Bank of America Corp.; Metrocorp Bancshares of Houston; and two subsidiaries of U.S. Bancorp, Firstar and U.S. Bank.

Iowa Attorney General Tom Miller has filed a motion to dismiss the suit. No decision has been made on the motion, and a trial date has not been set.

In 1997, a year after Visa’s and MasterCard’s processing networks lifted a ban on ATM surcharging, Iowa’s superintendent of banking forbade banks to surcharge in the state, arguing that the state’s electronic funds transfer law did not permit banks to discriminate against noncustomers in their pricing. Until this year, the banks did not formally challenge that interpretation.

Developments in a separate dispute over Iowa’s EFT law — plus the growing case law upholding banks’ right to surcharge — have emboldened banks to take on the current fight.

In the other dispute, Bank One Corp. has challenged an Iowa requirement that ATMs in the state must be run by banks with offices in the state. Bank One’s ATMs were in retail stores, and it had no branches in Iowa. Bank One lost in U.S. District Court but won on appeal. Last year, the Iowa attorney general tried to take the case to the U.S. Supreme Court, which refused to hear it.

Chief Judge Roger L. Wollman of the Eighth U.S. Circuit Court of Appeals wrote, “Congress has made clear in the National Bank Act its intent that ATMs are not to be subject to state regulation, and thus the provision of the Iowa EFTA that would prevent or significantly interfere with Bank One’s placement and operation of its ATMs must be held to be preempted.” This ruling encouraged the four banking companies to challenge the superintendent’s anti-surcharge rule.

Diane Wagner, a Bank of America spokeswoman, said her company has a national bank subsidiary and thus is subject to federal regulation. “States such as Iowa do not have the right to prohibit, or significantly interfere with, national banks to charge fees for the services they offer,” she said. “Iowa is the last state that prohibits us from charging convenience fees.”

Iowa’s current banking superintendent, Holmes Foster, said in a telephone interview that the Bank One case had nothing to do with the surcharge debate. “This is very much a consumer issue,” he said. “We hope the court will ultimately give due consideration to our pleas.”

Despite mounting evidence that they are tilting at windmills, some die-hard surcharge opponents refuse to concede defeat and continue to press legal challenges.

In California, an appeal remains pending by Santa Monica and San Francisco against a June 2000 ruling in U.S. District Court that invalidated the cities’ anti-surcharging laws. Adam Radinsky, Santa Monica’s deputy city attorney, said the appeal was filed in January and the cities are waiting to be assigned a court date. But Mr. Radinsky said the court’s clerk told him the hearing would probably not be this year.

He said that if the appeals court reverses the decision banking companies would have to refund all the surcharges they have collected since the dispute began. The companies have contracted with Star Systems, an electronic funds transfer network owned by Concord EFS, to track all surcharged transactions in both cities and to give the banks monthly reports.

Nevertheless, enthusiasm for surcharge bans has been dampened by the string of failures. In New York, for example, where a majority of City Council members expressed support for an anti-surcharge bill, the legislation’s sponsor has stopped pushing it since the California ruling. “There’s not much incentive to move forward on legislation that will not pan out,” said Sara Rutkowski, spokeswoman for the City Council.

Ed Mierzwinski, consumer program manager for the U.S. Public Interest Research Group, said his organization surveyed 500 banks around the country in March and found that 93% to 94% of them surcharge. But he said that U.S. PIRG had been heartened to see growth in the number of anti-surcharge alliances, bands of smaller financial institutions that agree not to surcharge one another’s customers.

Though U.S. PIRG has been trying to use consumer outrage and moral suasion to get banking companies to drop the fees, the California and Iowa fee opponents insist that they still have a legal leg to stand on.

“The fact is that when you have a fee that is unfair to consumers, that’s a fee that cities have a right to inhibit,” said Mr. Radinsky, the Santa Monica official. “Consumers are still incurring surcharges because banks are still fighting hard to continue this gouging.”

On June 30, 2000, the U.S. District Court for the Northern District of California ruled that local ordinances restricting ATM surcharges violate both the National Banking Act and the Home Owners Loan Act, which govern nationally chartered banks and federal savings banks, respectively.

In the ruling, Judge Vaughn R. Walker sided with Bank of America, Wells Fargo, and California Federal, the main subsidiary of San Francisco-based Golden State Bancorp. His decision struck down an anti-surcharge referendum passed by voters in San Francisco and an ordinance adopted by the Santa Monica City Council.

Mr. Radinsky, who has been litigating the case, said Judge Walker’s ruling was “clearly wrong. The federal law has always been clear that certain national bank fees can be regulated.” He referred to a 1985 California Supreme Court ruling in Perdue v. Crocker National Bank, which upheld a state law regarding unreasonable fees as not conflicting with the Electronic Funds Transfer Act of 1978. The decision said that states have the right to regulate sales of other industries and thus have the right to regulate the sales of bank services.

Stan Paur, the president and chief executive officer of Pulse EFT Association of Houston, one of the largest electronic funds transfer networks, said consumer hostility to surcharges has subsided in recent years.

“ATM users are informed, and understand their free options to get cash,” Mr. Paur said. Surcharges, he said, remain a convenience charge for those who choose to use an ATM that does not belong to their own bank.

“Consumers are using their own bank’s ATMs; they’re using the grocery stores and getting money back; or they’re using their debit cards as a substitute for cash,” Mr. Paur said.

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