To Surcharge or Not to Surcharge (1997)

Having just been charged $5 to use an ATM on my way here, a speaker told the ABA Technology and Operations Conference, I'm sure legislation on that topic can't be too far off. Others, however, disagree with Terence Roche of Phoenix-based M-One Inc., who shared his personal experience in the course of presenting the findings of his survey on bank technology. Despite all the media attention Sen. Alfonse D'Amato's bill receiving, legal experts say they don't expect a federal ban on even if more state-level bans are imposed. Connecticut and Iowa have long banned and bills have been introduced in about a dozen other states that would ban or freeze surcharging. Most of these were introduced in January. That activity doesn't mean anything concrete will develop, however. I don't see any credible movement among the states to ban or limit surcharges, says Matthew Street, ABA's associate general counsel. He adds, In most states, all it takes a word processor to get a bill in. What happening, according to Street, that compromises are being worked out in favor of disclosure versus an outright ban. Banks have only had the option of surcharging nationwide since April 1996, when Visa USA and MasterCard International repealed a bylaw that prohibited an ATM-owning bank from charging the customer of another bank a fee on top of the interchange fee that the customer's bank already pays to the ATM-owning bank. (See Cost of Convenience, p.46.) Now banks are having a difficult time deciding which side of the surcharge line to be on. Some banks that are currently, part of nonsurcharging alliances are considering surcharging if the practice not, in fact, banned. Others, currently surcharging, are considering desisting from surcharging, instead forming nonsurcharging alliances that will promote their banks as consumer-friendly places. There are reports of banks surcharging almost universally, and still others who surcharge on some automated teller machines but not on others. That range of approach cited by ABA as evidence that the marketplace providing customers with options. Edward Yingling, ABA's executive director of government relations, said in a statement responding to Sen. D'Amato's bill, We don't believe a Republican-controlled Congress would want to take the unprecedented step of placing price controls on a competitive issue. If that happens, thousands of ATMs set up for customer convenience would immediately be shut down. Strange bedfellows Today's surcharge situation originated in the late eighties' when a Texas bank entered into an arbitration dispute with a local ATM network, which was forced to let its users surcharge. Following similar cases in other states, the networks decided it was easiest to universally lift their surcharge bans. irony, notes Federal Trade Commission attorney David Balto, is that surcharges came about because some states [15] passed laws saying the networks must permit surcharging. Now, another 12 states are going in the opposite direction. The ATM networks are like a tennis ball, being battered back and forth by the states. Balto, an advisor to the FTC chairman, expressing his personal opinion. The commission has not taken an official position on surcharges. The surcharge debate at one level a public relations issue. The fact that community activist groups such as the U.S. Public Interest Research Group (PIRG) have been vocal in condemning the fees, has given the issue high visibility in the media, mostly at the expense of banks. On another level, the debate boils down to whether a surcharge gives institutions owning large numbers of ATMs -- mostly large banks, but also nonbank companies such as Electronic Data Systems -- a competitive edge over banks owning few or no ATMs. Parties that ordinarily are opponents have become allies because of this wrinkle -- the most striking example being cooperation between credit unions and banks. …