The war over automated teller machine fees added a major new front on Wednesday as New York City Council Speaker Peter F. Vallone followed through on a promise to introduce legislation that would bar financial institutions from levying noncustomer surcharges.
Backed by 17 council co-sponsors - half the number needed for passage by the city's 51-member council - Mr. Vallone said banks had been given "every opportunity" to propose alternative measures since he floated the idea of a ban last fall. Instead, he said, they put up a "stone wall," resorting to threats of a lawsuit.
The bill would put New York alongside two California cities, Santa Monica and San Francisco, in seeking to eliminate surcharges that banks impose on non-accountholders who use their ATMs. Mr. Vallone said he intends for the measure to become law within several months.
Courts have blocked enforcement of the California ordinances since bankers there initiated litigation, and Mr. Vallone said he expects a lawsuit against New York should his bill be passed. A statewide ban on fees in Connecticut by the state's banking commissioner was also recently overturned.
Banks defend the noncustomer charges as a fundamental right and necessity. Though the "convenience fees" are a profitable source of revenue for many banks, they are also compensation for the costs banks incur to run and maintain the machines, they say.
Michael P. Smith, president of the New York Bankers Association, vowed Wednesday to be as "forceful as we can" in arguing against the measure. The trade group has never threatened a lawsuit, he said, and is optimistic that the door is still open for discussion with council.
"We're totally opposed to price controls," Mr. Smith said. Moreover, many banks do not charge a "foreign fee," he said, and interchange rates do not necessarily reflect the cost of the transaction.
Consumers first saw widespread surcharging in 1996, when MasterCard and Visa's national ATM networks, Cirrus and Plus, dropped their bans on the practice.
The issue has emerged as a popular one for politicians and a convenient rallying point for consumer frustration over rising bank fees. It could draw attention because of what is expected to be a high-profile Senate race in New York State between New York City Mayor Rudolph Giuliani and First Lady Hillary Rodham Clinton.
A spokesman for Mr. Giuliani said he would not comment on the bill until lawyers had reviewed the measure, which would take a couple of days. Mr. Vallone said Wednesday that he believes "the mayor is basically in favor of it, but that remains to be seen."
Representatives for Mrs. Clinton could not be reached for comment.
At a City Hall press conference, council members releasing a report titled "Guilty as Surcharged" said they were not opposing interchange fees, those charged by banks to cover transaction costs imposed when their customers use ATMs owned by another institution.
"We are not opposed to banks' charging a reasonable fee to cover the cost of an ATM transaction," Mr. Vallone said. "However, the surcharges are nothing more than extra and unnecessary fines to customers. They are secondary charges covering costs that have already been paid for. Banks should be reminded that it's our money they are playing with."
The council said studies indicate that cash withdrawals cost banks about 27 cents when processed by an ATM, versus more than $1 by a teller.
Mr. Vallone said he thought New York banks were unlikely to take the same stance as those in Santa Monica, where Bank of America Corp and Wells Fargo both shut out noncustomers after the vote approving the ban. It is "highly unlikely that banks [in New York] would cut their nose to spite their face," he said.
Mr. Vallone said the council will explore a prohibition on nonbank ATM deployers who surcharge. As it stands now, the proposal only bars financial institutions from engaging in the practice.
