As New York City girded for a noisy legislative showdown over automated teller machine surcharges, bankers showed no signs of backing down from the fees.

"There is no momentum - that's a myth," said Mathew Street, associate general counsel for the American Bankers Association. ATM surcharging has become an entrenched and accepted practice, he said, and courts have upheld banks' rights over local initiatives to ban fees. "None of this stuff is working, and none of this stuff is going to work," he said.

That prediction did not quell the hoopla Thursday when the New York Public Interest Research Group rallied in front of City Hall, attempting to win Mayor Rudolph Giuliani's support for a bill that would prohibit banks from assessing noncustomer surcharges. The consumer group said that the measure, sponsored by City Council Speaker Peter Vallone, has enough support to pass with or without Mr. Giuliani's support. The mayor has not stated his position.

Mr. Vallone said he expected that any surcharge ban would trigger an immediate lawsuit from the banking industry, as has happened in other municipalities that have adopted such laws.

George L. Engelke Jr., chairman, president, and chief executive officer of Astoria Federal Savings Bank, said he would challenge a ban "to the death."

"I will not sit back ever if this takes place," he said.

F. Christopher McLaughlin, executive vice president for the personal banking division at HSBC Bank USA, a unit of London-based HSBC Holdings PLC, said there were "any number of actions that could be taken" if the city passed such an ordinance. One option could be to emulate Bank of America Corp. and Wells Fargo & Co., which began denying noncustomers access to their ATMs in Santa Monica, Calif., after a ban was passed there. Those banks said they would not reverse that policy until the matter was resolved. Mr. Engelke said New Yorkers would indeed see banks shut out noncustomers if a bill were passed.

"If you think Citigroup put ATMs in to serve Astoria Federal customers 24 hours a day, I think that's funny," he said.

Eliminating ATM surcharges would cause transaction volumes on HSBC machines in New York to "skyrocket" and would lengthen customer waiting times, Mr. McLaughlin said. The company would have to add more machines to maintain the level of convenience to its own customers, he said.

"We'd love everyone to be our customer, and then surcharging is a nonissue," Mr. McLaughlin said.

Courts have repeatedly upheld banks' ability to set their own prices - at ATMs and elsewhere. Nonetheless, Michael Smith, president of the New York Bankers Association, said his group takes Mr. Vallone's legislation "seriously" and is "deeply concerned about any efforts that would in effect reimpose price controls."

Mr. Smith said his group's priority is to prevent passage of the bill. "We are going to continue our dialogue with the council," he said. "We hope that through public dialogue, we can avert action by the City Council."

Mr. Street of the ABA said in 1998 and 1999, antisurcharge legislation was introduced statewide in more than 20 states, but none of the measures passed. These bills are "an impulse that's really on the downswing," he said. "There are only about half a dozen states this year that have seen bills in their legislatures to ban or limit the fees."

Mr. Street said state legislatures may have a right to impose bans on state-chartered banks, but when it comes to nationally chartered ones, they are "palpably unconstitutional."

"Maybe we [should] begin to look for sanctions for abusing the judicial process," he said.

Since the era of surcharging started four years ago, state and federal courts have ruled in favor of banks in virtually every battle over the consumer fees. In the three municipalities where bans have been approved - San Francisco, Santa Monica, and Woodbridge, N.J. - federal judges, prompted by bank-filed lawsuits, immediately blocked enforcement of the ordinances until the cases could be decided.

Nevertheless, the battle in New York may be pivotal. A spokesman for Mr. Vallone said Thursday that 35 of the 51 New York City Council members support the bill. Though hearings on the proposal are unlikely to begin before June or July, 35 "yes" votes would be enough to not only pass the bill, but override any mayoral veto.

Mr. Vallone has said Mr. Giuliani seems to like the idea, but a spokeswoman for the mayor said Thursday that he is still reviewing the legislation.

Opponents of noncustomer fees object to what they call "double-dipping." Consumers are typically charged two fees when they use an ATM that is not owned by their bank - a "foreign fee" charged by their bank and a surcharge levied by the ATM owner. Proposals to curb the fees - at the federal, state, and local levels - have routinely proposed elimination of the surcharge, not the foreign fee.

At the New York Public Interest Research Group's press conference, Mr. Vallone said, "It's O.K. to make a profit, but it's not O.K. to double that profit at the people's expense."

A study released by the group Thursday concluded that 93% of ATMs in New York state surcharge, up from 79% in 1999, 45% in 1998, and 33% in 1997. The average fee is $1.33, compared with $1.27 in 1999, $1.12 in 1998, and $1.05 in 1997. Fifty-nine percent of those surveyed said they assess a $1.50 surcharge.

Lisa Fickenscher contributed to this article.


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