Recently, American Banker printed an article on ATM fees written by Joe Belew, president of the Consumer Bankers Association, who claimed that the recent trend of doubling ATM fees to noncustomers is merely the cost of "convenience."
If that is so, then "convenience" is getting pretty darn expensive. As the New York Times recently reported, the average consumer is paying a whopping $155 per year for the "convenience" of getting his or her own money. In fact, the Times article stated that ATM fees are often higher than those assessed by street-corner check-cashing services.
What has happened to the traditional relationship between a bank and its customers? There was a time when banks actually compensated the consumer for the use of the consumer's money. Today, the battle cry of the banks seems to be "Let's nickel-and-dime the consumer to death!"
Basically, there are at least three major flaws in Mr. Belew's argument: Before the networks lifted the ban on double ATM fees, most consumers already paid a fee, usually about $1.00, to their own financial institutions to use ATMs belonging to another institution. Part of that fee, called the interchange fee, is transferred, through the network, to the ATM operator as compensation for transactions by noncustomers.
Some banks have even levied fees for teller services in an effort to get customers to use ATMs, since it is much cheaper to provide banking services to their customers through ATMs than to provide teller service in an actual bank branch. ATMs save money for banks by reducing the volume of teller service provided by each institution. In 1969, when the first ATMs appeared in my home area of Long Island, N.Y., we were told that these machines would provide 24-hour convenience at a reduced cost. Making this transition was difficult for most consumers who were used to personalized, if occasionally inconvenient, teller service. In the long run, though, most of us got used to it. Consumers changed their banking habits as they came to rely on ATMs, and the machines appeared everywhere.
By the end of 1995, before the surcharge ban was revoked, more than 122,000 ATMs had been deployed nationwide. The number of ATMs has been growing at an annualized rate of 11.8% for more than a decade.
Yet with all this growth, financed by the old fee structure, banks are now claiming that ATMs are prohibitively expensive to operate. Banks are threatening to reduce their ATM services unless they are permitted to double-charge. It just doesn't wash.
they will be forced to pay two fees whenever they try to access their own accounts. A year ago, banks were prohibited from surcharging in most states. Recently, a nationwide survey concluded that consumers are getting double-charged at nearly half of the ATMs in the U.S. Pretty soon, it will be impossible in some parts of the country to locate an ATM that doesn't surcharge.
When a consumer uses an ATM, he or she is usually a captive audience. The consumer rarely has much of a choice, and will usually go to the first available machine. A message on the screen indicating that the ATM operator is charging an extra fee appears after the consumer has inserted his or her ATM card and entered the necessary information. At that point, it is extremely unlikely that the consumer will stop the transaction to go hunting for another ATM. And the banks know this.
At present, there is simply no incentive for the ATM operators not to double-charge, because their relationship with individual consumers is transitory. Also, many banks see the surcharge as an opportunity to attract new depositors, openly soliciting new depositors through on-screen advertising during an ATM transaction, and offering free access to their machines.
But this "free access" was the whole reason for establishing ATM networks over a decade ago. Banks that attempt to lure customers in this fashion are simply preying upon smaller institutions and their depositors.
Last Congress, I sponsored legislation, the Fair ATM Fees for Consumers Act, along with Sens. John Kerry, Richard Bryan, Barbara Boxer, Carol Moseley-Braun, and Patty Murray to ban ATM surcharging.
The Banking Committee has held a hearing on this issue, gathering testimony from banks, independent ATM operators, and consumer groups. Visa and MasterCard refused to attend. This was extremely unfortunate, since they could have provided the committee with unique insight as to the reasoning behind the original surcharge ban, as well as their rationale for abandoning it.
Unfortunately, the session ended before Congress could act on my bill. I plan to reintroduce it during the 105th Congress. In December, I asked the General Accounting Office to examine ATM fees. We need to know how this practice has affected the market and we need information on the cost of operating ATMs.
I intend to hold further hearings on this important consumer issue when we hear GAO's conclusions.
From my perspective and those of millions of American consumers, double ATM fees are just plain wrong. People should not pay twice just to get their own money, and Congress must remain vigilant in making sure that new technologies billed as paragons of convenience aren't used to bilk consumers out of their hard-earned paychecks.