Appearing before the Senate Banking Committee Tuesday, top executives from the two national automated teller machine networks defended their decision to let members levy surcharges.

By April 1996, when MasterCard's Cirrus System Inc. and the Visa U.S.A. Plus Network lifted their surcharge bans, 15 states already had barred the two networks from enforcing it, argued Cirrus president and chief executive G. Henry Mundt 3d.

"Failure to (lift the ban) would have resulted ... in a significant number of ATM operators withdrawing from our ATM network," Mr. Mundt said. "In a business as competitive as the ATM business, we could not let that happen."

"Permitting access fees could help increase the number of ATM locations available to consumers," added Plus executive vice president Anthony N. McEwen.

The executives were called before the committee by Chairman Alfonse M. D'Amato, who introduced a bill last month to ban the fees. The New York Republican repeatedly noted that between 1980 and 1995 the number of ATMs grew an average of 11% per year. Sen. D'Amato said this statistic rebuts the argument that surcharges are necessary to fund the opening of more ATMS.

"If that's true, then why did the banks invest so heavily in ATMs before they could double-charge?" Sen. D'Amato asked. The network executives did not have an opportunity to respond to the question.

Sen. D'Amato also argued that the consolidation of networks has reduced the ability of consumers to find ATMs that do not impose surcharges, which are levied on users who do not have an account with the bank that owns the machine. He criticized the Department of Justice and the Federal Reserve Board for approving every ATM network merger since 1985.

"These mergers were cleared under the premise that larger networks could operate more efficiently and that consumers would have more choice," Sen. D'Amato said. "The evidence points in the opposite direction."

The two banking industry representatives testifying Tuesday supported Sen. D'Amato's bill, arguing that small banks that cannot afford to operate many ATMS will lose customers who avoid surcharges by moving their accounts to banks with more machines.

"The effect of surcharging will be to kill off small bank competition because customers have grown accustomed to and depend on the convenience of ATM machines," said Thomas M. Caron, president of Easton (Mass.) Cooperative Bank.

With no support from his fellow Republicans, Sen. D'Amato does not have the votes needed to get the measure out of committee.

Donald I. Baker, a partner with the Washington law firm Baker & Miller, presented an alternative that appeared to intrigue Sen. D'Amato: legislation that would shield merging networks from antitrust challenges if they agree not to levy surcharges. "We should look at that," Sen. D'Amato said.

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