Consumer activists turned up the heat last week in their campaign against automated teller machine surcharges.

The U.S. Public Interest Research Group and the Center for the Study of Responsive Law issued a report blasting the banking industry's ATM pricing policies.

With those groups' support, Rep. Bernard Sanders of Vermont introduced legislation to prohibit the surcharges that MasterCard and Visa rules will permit, effective today.

While consumer groups have frequently criticized bank prices, they are especially incensed about the additional fee that an ATM-owning bank can impose on any customer making a cash withdrawal, on top of what that customer might be paying to his own bank.

Edward Mierzwinski, consumer project director at Public Interest Research Group, accused the industry of "gouging consumers with new and higher fees."

"ATMs were introduced as cost-savers for banks and consumers," said Janice Shields, banking researcher at the Center for Responsive Law, a group affiliated with Ralph Nader. With the surcharges, "banks are double- charging for something that actually saves them money."

As in past flareups over electronic service fees, banking interests refuted the accusations.

American Bankers Association spokesman John Hall called the consumerists' assumptions "ridiculous." He said they used "voodoo accounting" and cited "overblown profits."

The consumer report said ATMs generated $3.1 billion in transaction fees for banks in 1995. Though ATM transactions cost banks $3.2 billion, the report said, profits increased by $2.2 billion as a result of labor savings.

But in the ABA's 1995 Retail Banking Survey, 47% of banks with over $1 billion of assets said they were losing money on their ATMs. Only 6% said they made a profit.

Mr. Hall, citing Federal Deposit Insurance Corp. data, said labor costs in banking have fallen only 5% in the last 10 years.

Rep. Sanders, an Independent, raised the issue at a House Banking Committee hearing last Wednesday. His senior legislative assistant, Elizabeth Mundinger, said Banking Committee chairman Jim Leach would consider a request for a hearing on fees.

Rep. Sanders' proposed Electronic Fund Transfer Act of 1996 says "no fee may be imposed on the consumer ... by the person operating the electronic terminal at which the transfer is initiated."

MasterCard and Visa had long resisted such fees in their Cirrus and Plus networks. They lifted their bans after several states had permitted surcharges, which are common at machines in gambling casinos, resorts, and other remote, tourist-oriented locations.

Most industry observers do not expect much to come of the militancy, given Washington's anti-regulation climate. Rep. Sanders is not viewed as a major legislative force, though H. Kurt Helwig, executive director of the Electronic Funds Transfer Association, said the issue has "potentially popular appeal in an election year."

Steven Cole, chief executive of Cash Station Inc., an ATM network based in Chicago, said ATMs are profitable without surcharging "if you place machines well and interchange prices are reasonable." But he said banks should be free to make pricing decisions.

"Banks seem to be a more appealing target for media and consumer groups than other industries that surcharge," such as hotels charging for phone calls and TicketMaster charging for ordering tickets by phone, Mr. Cole said.

Stanley Paur, president of Pulse EFT Association in Houston, said surcharging in Texas has been "a nonevent" since state law permitted it in 1991.

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