Last month's end to Connecticut's longstanding ban on automated teller machine surcharging has not spurred the deluge of fee-imposing machines many might have expected.
Though two of the state's largest ATM deployers wasted no time imposing noncustomer surcharges, other financial institutions have refrained, unconvinced that the legal and legislative fights are over and - perhaps more important - unsure of how consumers would react.
"This is not helpful to the banking business in the state of Connecticut," said Michael Bazinet, a spokesman for Waterbury-based Webster Bank, a federally chartered thrift with 200 ATMs in the state. Surcharging is "incredibly unpopular" in Connecticut, he said. "We see no need to rush at this point into making a decision to surcharge. We'll wait and see."
But Webster, which supported the banking commissioner's ban on surcharging, may impose the fees if it finds too many noncustomers clogging up its ATM lines and interfering with its own customers' convenience. "If it were an even playing field, we'd prefer not to surcharge," Mr. Bazinet said.
After a protracted legal battle, the Connecticut Supreme Court voted 5-2 on Dec. 20 to overturn Banking Commissioner John P. Burke's four-year prohibition on surcharges. One of two plaintiffs in the case, First Union Corp. of Charlotte, N.C., began applying $1 fees at its 123 ATMs the next day. FleetBoston Financial Corp. of Boston, the other plaintiff, started charging the same amount at its 518 Fleet and BankBoston machines on Monday.
The Connecticut ruling leaves Iowa as the only state in the country that bans noncustomer surcharges. However, last fall San Francisco and Santa Monica, Calif., became the first municipalities to adopt bans on surcharging since the practice became prevalent in 1996. Legal challenges have so far blocked enforcement of both California ordinances, but the moves inspired New York City Council Speaker Peter Vallone to say he will introduce a similar measure there.
Though many major banks defend surcharging as a fundamental right and a necessity, Gerald Noonan, president of the Connecticut Bankers Association, said he is not aware of any bank in the state other than First Union and FleetBoston that has begun surcharging.
Many banks are waiting to see what the state's General Assembly will do in the next session, which begins in February, he said.
Attorney General Richard Blumenthal has vowed to seek legislation explicitly outlawing the charges. Ironically, he said, the administrative ban overturned by the state's high court may have undermined efforts in Connecticut to pass such legislation.
"I'm speaking with legislators about moving as quickly as possible to approve legislation in the next session, and so far I'm very encouraged by the outrage and anger on the part of many people - consumers, legislators, and others - in the wake of the court's decision," he said.
Mr. Blumenthal, who has urged banks not to impose the fees until the issue is "resolved definitively" in the General Assembly, said previous bills had failed because the administrative ban left little incentive to pass a law.
"Their attitude was, why antagonize the banks if there's no surcharge" allowed anyway, said Mr. Blumenthal, an activist on consumer protection and antitrust issues. "Now there's clearly a need for it The Supreme Court decision, if anything, was an open invitation to the legislature."
Mr. Noonan said some banks will "wait and see" what comes of court battles like those in California that are expected to address the federal preemption issue. Last April a federal judge ruled that it is up to the Office of the Comptroller of the Currency to decide whether nationally chartered banks can impose surcharges in Connecticut.
The Connecticut Supreme Court decision did not address the federal preemption issue, however, only the question of how a 1975 Connecticut law on fees that had underpinned the Banking Department's fee ban should be interpreted.
A spokesman for the Connecticut unit of Citizens Financial Group Inc. of Providence, R.I., said the banking company will consider marketplace and well as legal and legislative factors before deciding what to do with its 47 ATMs in the state. Another option is joining the SUM program, a surcharge-free network in which banks agree not to surcharge each other's customers, he said. Citizens Bank of Massachusetts joined the program in November.
SUM, administered by the NYCE Corp. ATM network, was begun in Massachusetts and was extended to Connecticut, Vermont, New Hampshire, Rhode Island, Maine, New York, New Jersey, Pennsylvania, and Delaware in October. So far, 10 Connecticut banks have joined the network, and two or three more contracts are expected this week, a NYCE spokeswoman said.
Bridgeport, Conn.-based People's Bank, with 203 ATMs in the state, has similar concerns and is studying the impact on its network and the "response in the marketplace," said spokeswoman Deborah MacDonnell.
"A number of banks are sensitive about alienating their own customer base," Mr. Noonan said.
FleetBoston spokesman Jim Schepker said Fleet, before merging with BankBoston, had estimated that it was losing $15,000 a day in surcharge revenue. As one of the largest deployers in the state, FleetBoston has borne much of the expense of ATM use, he said.
"Smaller banks were not under the same pressure. They were in fact using the ATM network of Fleet for their customers," he said. "They continue to have the luxury of standing back and waiting to see what will happen."