The Defense Department has abandoned the idea of prohibiting banks from collecting surcharges at automated teller machines on military bases, the agency said last week.

In August 1999, the department formally proposed a surcharge ban and solicited comments. Dozens of banking industry executives responded, saying that such a policy would discourage banks from operating ATMs on military bases. Instead of benefiting military personnel, the writers argued, the proposal would harm them by curtailing ATM service.

The Pentagon had reasoned that military people were particularly hard-hit by surcharges because of their low pay and dependence on ATMs when stationed far from their hometown banks.

But apparently the bankers' arguments prevailed. The proposal was absent from the Defense Department's recent Web site posting of its updated banking regulations, and officials said the omission reflected a decision to stay with the status quo.

Banks will continue to negotiate fees and services with base commanders, and the surcharge issue will not be dictated by top-down orders from the Pentagon, said Tom Summers, a Pentagon staff accountant. He said the decision will be reflected in next month's Federal Register, which will have no mention of a surcharge ban.

Mr. Summers said the Pentagon had proposed the surcharge ban as a way to help enlisted people with limited income. "We require direct deposit and then we take these kids and move them all over the country," Mr. Summers said. "They're not anywhere long enough to establish a relationship" with a bank, and "they have a difficult enough time with their money."

Bankers said that banning surcharges is not a viable answer to the problem of low wages for military personnel. "I was unable to get the department to define what problem they were trying to solve," said Henry W. Neill Jr., executive vice president of the Association of Military Bankers of America, which spearheaded the campaign against the ban. "Do you solve a problem of low pay for the military by restricting the services they can use?"

Wayne Andrews, vice president of Columbus Bank and Trust in Columbus, Ga., worked with Mr. Neill on the campaign. He manages his bank's relationship with Fort Benning in Georgia and said that, if surcharging had been banned, his bank would probably have removed about half its 19 ATMs at the base. The institution has been Fort Benning's bank since the early 1920s.

Without surcharges, the Fort Benning ATMs would not generate enough revenue to meet their operating costs, Mr. Andrews said. "Many of our ATMs are located in very remote locations," he said. "Customers don't mind [the surcharges] because of the convenience."

Mr. Andrews said his bank, a $3 billion-asset subsidiary of Synovus Financial Corp. of Columbus, tries to keep military personnel as customers after they leave the base by offering them Internet banking service.

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