Washington state legislators are clearing the way for a bill that would permit owners of automated teller machines to override current Visa International rules by surcharging cardholders of foreign banks.

Visa says U.S. financial institutions can surcharge only U.S. customers for ATM usage. States can supersede those rules by passing laws, and 13 states have done so - Alabama, Arkansas, Georgia, Idaho, Louisiana, Maine, Minnesota, Mississippi, Montana, Nevada, Tennessee, Texas, and Wyoming.

The Washington bill would cover all ATM owners in the state, including nationally chartered banks.

Visa, of San Francisco, says it wrote its rules prohibiting ATM surcharges for foreign customers in the 1980s but did not enforce them until last year.

Legislators said merchants near the Canadian border were the catalyst for the bill, which was introduced last month and passed unanimously by the Washington House of Representatives on Thursday. Rep. Doug Erickson, who introduced the bill, said retailers complain that Canadians crossing the border can use U.S. ATMs for free, while U.S. citizens are charged $1.50.

All ATM users see the same screen disclosure that a surcharge will be assessed for the transaction, but only American ones will actually be assessed the fee, Rep. Erickson said.

"My bill simply says you cannot be prohibited from charging a fee to anyone," he said in an interview last week. The bill was modified slightly to accommodate the concerns of state credit unions, which wanted the right not to charge anyone.

A source at Visa's Plus ATM network said Washington merchants had long been surcharging foreign customers, in violation of Visa's rules.

"We knew it was happening, but we didn't bother to enforce it, because we didn't personally think it was a big deal," the source said. It became a big deal when Visa "started getting some rather large institutions from outside the U.S. complaining that their cardholders were getting surcharged."

Visa went to its legal department and discovered that 13 states allowed surcharging of foreign ATM cardholders. It then sent out a memo to Plus acquirers outside of those 13 states, underlining its rules. It gave U.S. ATM owners 12 to 18 months to comply without being fined. It also developed a more rigorous auditing system to track surcharging, the spokesman said.

Rhonda Bentz, a spokeswoman for Visa U.S.A., said it was not taking any position on the bill but had been in discussions with Washington legislators to explain Plus network rules.

Sharon Gamsin, a spokeswoman for MasterCard International of Purchase, N.Y., wrote in an e-mail that it allows fees to be assessed for any ATM access on its Cirrus network. "The Washington state bill essentially says the same thing," she wrote. "It is up to each member to decide whether or not to assess a charge."

Some states with similar laws allow ATM owners to impose any type of surcharge they choose. Jeff Blaylock, the chief clerk of the Texas House Committee on Financial Institutions, said the state does not make exceptions for foreign banks.


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