moved to preempt a San Francisco ordinance that would ban automated teller machine surcharging.

Taking its firmest position on the issue to date, agency officials said it is legal for ATM owners to impose extra charges on noncustomers. The OCC plans to file a legal brief stating this pro-bank position in support of a lawsuit initiated by the California Bankers Association.

"This is a free market, and they are authorized to charge for services they provide," OCC Chief Counsel Julie L. Williams said in an interview. "They have that authority under federal law, and the city's ordinance is in direct conflict with that."

Backed by 66% of San Francisco's voters, the ordinance is scheduled to take effect 10 days after city officials certify election results, which could take two weeks. However, U.S. District Court for the Northern District of California has scheduled a hearing Nov. 15 to decide whether to grant a preliminary injunction that would prevent the ban from taking effect while the issue is litigated.

The California Bankers Association, Bank of America Corp., and Wells Fargo & Co. have sued the city of San Francisco, arguing that it lacks authority over national bank fees.

Marc Slavin, a deputy attorney for San Francisco, said the city is gearing up for a hard fight against the banks. The city has successfully gone up against big industry before, he said, perhaps most notably against tobacco companies.

"Individual banks don't provide a mechanism to allow their customers to protest overcharges," he said. "We do believe that the ordinance is a valid ordinance and it is going to withstand the legal challenge."

According to Ms. Williams, the OCC's planned brief will take the banks' argument further by asserting that the National Bank Act gives banks the right to charge noninterest fees, including ATM surcharges. Therefore, it will argue, such fees may not be declared illegal at the state or municipal level.

That action would be the latest step in the OCC's ongoing battle to maintain its authority over the activities of national banks. That authority has been challenged in recent years by efforts to restrict bank powers in Rhode Island, Connecticut, Iowa, and New Jersey. Another California city, Santa Monica, has legislated a similar ban on ATM surcharging.

In cases where the state concedes, the agency's interpretation is observed without debate. If a state challenges the agency's opinion, however, the OCC's decision must be validated by a judge. Courts typically defer to federal regulators' interpretation of laws but not always. This year a federal appeals court ruled against the OCC's preempting a Florida annuities law.

In April, a U.S. District Court judge said a Connecticut ban on ATM surcharging did not apply to national banks. The OCC had claimed federal law preempted the Connecticut ban, but the agency has not told national banks that they may charge the fees.

Edmund Mierzwinski, consumer program director for the U.S. Public Interest Research Group in Washington, said the surcharging ban remains in place in Connecticut.

The OCC "has merely tried to claim that it is the sole enforcer," he said. "It has not tried to preempt those state laws" for fear a judge will not defer and rule that ATM fees are illegal.

Foes of surcharging argue that banks gouge consumers by collecting two fees on an ATM transaction -- the surcharge by the machine owner and a "foreign fee" that the card-issuing bank charges when its customer uses another institution's terminal.

ATM owners also typically collect an interchange fee from the cardholder's bank.

The fees became prevalent in 1996 after Cirrus and Plus, the national networks of MasterCard International and Visa U.S.A., respectively, dropped their bans on the practice. Though Connecticut and Iowa have since banned surcharges, legislative attempts to adopt similar prohibitions have failed at the federal level and in other states.

Consumer advocates view the San Francisco vote -- the first consumer referendum on the issue -- as a precedent that will lend momentum to other anti-surcharge campaigns. Activists say they are making headway in Los Angeles, San Diego, and New York City. The U.S. Department of Defense also recently proposed a rule that would prohibit such fees on military bases.

"Had we had fair fights in Congress, had the banks not spent so much money beating (former Sen.) Al D'Amato's proposals, we could have won there," said U.S. PIRG. "We have just turned a big corner, and we're very encouraged and excited... . Whenever there's a fair fight, we win."

Bank of America spokesman Harvey Radin said consumers can avoid the fees by using their own banks' ATMs. "All banks are doing is charging noncustomers for an optional service," he said. "We price our products and services to reflect their value and then consumers make their choice."

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