WASHINGTON -- A prominent consumer group attacked the banking industry Wednesday, saying customers are charged unreasonable fees on ATM transactions.

According to a report issued by the Consumer Federation of America, banks charged their customers $2.5 billion last year to use the machines. Industry profits associated with ATM use reached almost $2 billion in 1993, the group said.

"Only in banking do consumers pay more for self-service," said Chris Lewis, the federation's director of banking and housing policy.

"Clearly, with more and more banks charging ATM fees, and with those fees climbing higher and higher, the cost efficiencies of electronic banking are not trickling down to consumers," he added.

Series of Attacks

The Consumer Federation's report is one of several released recently by consumer groups attacking the industry for its increasing reliance on fees. As industry profits remain strong, consumer groups say lenders should keep customers' costs as low as possible.

Bankers dismissed the study Wednesday, saying that ATM networks are a convenience that customers are willing to pay for. Consumers wanting to avoid the fees can do so by shopping around for the best deal or using a bank teller, they said.

"We don't apologize for the fees; we think they are fair and equitable," said Ed Alwood, a spokesman for the American Bankers Association. "We know if the day comes that they are not, our customers will find another place where they are."

"People have gotten accustomed to the banking industry of the 1970s," he added. "This is the '90s - an era where consumers will pay fees based on the services they take advantage of."

The federation used data from the American Bankers Association, the Nilson Report, and Bank Network News to calculate fees and profits associated with ATM use. It found that ATM transactions cost lenders $2.9 billion last year.

But those costs were more than offset by the $2.5 billion in revenues and the $2.3 billion in reduced labor and paperwork associated with ATM use, the group found. In addition, the report said:

* Of every dollar of ATM fees 78 cents went to profits.

* In 1992, 82% of banks charged customers for withdrawals from another bank's machine. That compares with 67% in 1989.

* While ATM fees have increased, costs of maintaining the machines declined by 4.3% between 1991 and 1993.

The report also accused the industry of engaging in dubious tactics to generate income. These include placing ATMs in places where collecting fee income from non-account holders will be highest, and adding new ATM surcharges and fees.

Methodology Challenged

Bankers questioned the methodology and data used in the report. Many of the calculations were simplistic, and did not take into account all the costs associated with maintaining the networks, they said.

Some even questioned the study's core assertion: that the ATM networks are huge sources of revenues and profits.

Tom Tremain, First National Bank of Chicago's vice president of electronic banking, says his bank's ATM network is not a money maker. The bank offers the service nonetheless, because of customer demand and strong competition, he said.

Mr. Tremain also questioned the consumer group's assertion that banks have saved billions of dollars through reduced teller costs associated with the growth in ATMs.

"We certainly haven't reduced branches or eliminated tellers to any significant extent over the years, while our ATM transaction volume has grown from zero to $3 million a month," he said.

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