Automated teller machine surcharges have become the subject of a Justice Department probe, but actions already taken by ATM networks may already have softened its bite.
Several of the major networks have been served subpoenas regarding their responses to surcharging. The focus is on so-called nondiscrimination rules, which forbid selective surcharging of other banks' customers and require all customers to be treated the same.
Typically, community banks formed groups that made no-surcharge pledges that could be advertised as a benefit to cardholders.
After early resistance to these splinter arrangements within their memberships, major regional networks have made provisions to let them be.
"Most of the networks have amended their policies to accommodate these types of arrangements," said Stan Paur, president and chief executive officer of Pulse EFT Association, Houston. "The reality is most community banks have imposed these types of fees."
In the past year Pulse, NYCE Corp. of Woodcliff Lake, N.J., and Honor Technologies Inc. of Maitland, Fla., have allowed community banks to join surcharge-free alliances.
Others such as Cash Station Inc. are considering amending their nondiscrimination rules in response to member requests, said James Hayes, executive vice president of the Chicago-based ATM network. "I don't think (Justice) will have a lot to fight or object to if that's their concern."
Reports on the investigation surfaced in several news publications in recent days. In a prepared statement, the Justice Department did not indicate whether the probe goes beyond the nondiscrimination question.
"The antitrust division is looking at the possibility of anti- competitive practices relating to certain discriminatory surcharge rules," said Gina Talamona, a department spokeswoman.
Stephen Paul Mahinka, a Washington-based antitrust lawyer working on behalf of Electronic Payment Services Inc., owner of the MAC network, said the Justice Department has requested information on how surcharges work and why institutions use or do not use them, as well as selective surcharging. "It's a significant matter when the Department of Justice has an investigation," said Mr. Mahinka. "But because there's an investigation doesn't mean there's a law violation."
Mr. Mahinka said MAC now allows for the formation of surcharge alliances, but a bank can join only one because of technical limitations. The network is focusing on year-2000 compliance issues before fixing that glitch.
The ATM probe is yet another example of tighter antitrust scrutiny in electronic payments. The Federal Trade Commission is investigating a Visa U.S.A. debit card product; Justice has been looking into MasterCard and Visa membership rules for at least two years; and several major retailers have sued Visa and MasterCard over their debit acceptance requirements.
Sen. Alfonse D'Amato, R-N.Y., though rebuffed in a Senate Banking Committee vote last week, still vows to ban all surcharges.
Mr. Mahinka said MAC changed its nondiscrimination rule because of market forces, not legal pressures. "It's a reaction to others being allowed into other alliances. You want to offer as many things to members as you can."