Many community banks have adopted a no-fee strategy for automated teller machines as a marketing tool against bigger banks, but that doesn't mean the small banks oppose surcharges.

In recent letters to the presidents of Visa U.S.A. and MasterCard International, two groups of community bankers said they oppose federal legislation that would prohibit ATM surcharging. But they quibbled with the ways the card associations treat smaller financial institutions.

The two associations-America's Community Bankers and the Independent Bankers Association of America - jointly asked that the Visa-Plus and MasterCard-Cirrus ATM networks change their rules to prevent machine owners from levying both a surcharge and an interchange fee on transactions.

In the letters, the groups pleaded for a "private sector solution" to the burning debate over surcharges. They said the proposed rule against double-dipping would "address the perceived inequity of levying both access and interchange fees on a single transaction."

The IBAA first requested the change in January, attempting to preempt or forestall legislation. America's Community Bankers signed on this month.

"From the surcharge standpoint, we feel very strongly that the government should not intervene in pricing," said Robert Schmermund, a spokesman for America's Community Bankers.

If national associations take a lead on the issue, Mr. Schmermund said, they would send a message to Congress that the industry is serious about tackling the issue on its own-without the need for additional regulation.

The ACB and IBAA asked MasterCard and Visa to create an exemption for smaller members, permitting them to waive or reduce surcharges for one another's customers.

To the IBAA's initial request in January, Visa-Plus responded by letter that the "issues were of utmost importance" and that "efforts were under way to analyze the various components," said Viveca Ware, IBAA director of payment systems.

MasterCard-Cirrus said in its letter that it had no plans to take action, she said.

Though neither national network has responded to the associations' joint appeal, there are indications from staff discussions that an agreement may be reached, Mr. Schmermund said.

Even a change in card association rules might not defuse the legislative threat, Ms. Ware said.

It might signify to anti-fee crusader Alfonse M. D'Amato, chairman of the Senate Banking Committee, that Visa and MasterCard, which declined to participate in hearings last year, are now serious about dealing with the fee issue, Ms. Ware said.

Sen. D'Amato has blasted what he views as double-charging and has reintroduced legislation from last year to eliminate surcharges.

America's Community Bankers has not taken a position on which fees its members would levy if rules it seeks were adopted, Mr. Schmermund said.

The IBAA has taken the stance that decisions should rest with individual ATM owners, Ms. Ware said. An owner could deploy some ATMs with an interchange fee and others with a surcharge, she said.

The IBAA released a member survey yesterday saying 92% of community banks do not surcharge non-customers more than $1 a transaction.

More and more attention has been focused on ATM fees as owners have rushed to add surcharges. In April 1996, both Cirrus and Plus lifted bans on the surcharges, which had been permitted in a number of states.

Today, 45% of ATMs surcharge nonaccount holders at an average $1.15 per transaction, according to a study released April 1 by Public Interest Research Group.

Despite consumer complaints about surcharges, ATM use continues to grow. NYCE Corp., for instance, reported that its 41.8 million ATM and point-of- sale transactions in May set a volume record.

The Woodcliff Lake, N.J., company attributed the high volume to graduations, holidays, and the increasing use of ATM cards at supermarkets and gas stations.

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