New
York, NY, Chicago, IL, and other cities across the country have taken
steps to ban controversial ATM surcharges, according to a new report
released by the U.S. Public Interest Research Group. The report
coincides with the 4th anniversary of national ATM surcharging on April
1st, and rebuts deceptive banking industry arguments against the rights
of states and cities to ban surcharging.
On
April 1, 1996, the national ATM networks, Plus and Cirrus, rescinded
their ban on ATM owners imposing surcharges on non-accountholders. The
surcharge is a second, double fee, on top of a foreign fee already paid
by most consumers when they use an ATM not owned by their bank..
"Despite
fierce legal counterattacks by bank lawyers and federal regulators,
more cities and states still seek to ban the double ATM surcharge,"
said Ed Mierzwinski, Consumer Program Director of U.S. PIRG. "More and
more state and local officials are recognizing that it's unfair to
charge consumers twice to use the ATM only once."
"Banks
had a ninth year of record profits in 1999," added Mierzwinski, "So why
do they need to pile on $2 billion in revenues from the unfair ATM
surcharge? It is unacceptable that it costs consumers $2.50 or more to
use ATMs that cost only $1 five years ago."
Recently,
several cities have passed resolutions to ban the ATM surcharge. This
February, the city of Woodbridge, NJ joined Santa Monica and San
Francisco in banning surcharges. In New York City, a majority of City
Council members have co-sponsored a ban proposed by Speaker Peter
Vallone, according to the report, "ATM Fee Backlash: Local Rebellions
Against Unfair Surcharge Spread."
The
report summarizes the status of surcharge legislation in states and
cities around the nation. Among the other key findings of the report
are the following:
- Surcharges
have begun to exceed $1.50. Fifth Third Bank (OH) is now imposing $2
surcharges. Mellon Bank [eastern/central PA locations] is now charging
$1.75.
- In
February, nine state Attorneys General [California, Connecticut, Iowa,
Oregon, Minnesota, Nevada, New York, Washington and West Virginia]
filed a legal brief in support of the right of the cities of Santa
Monica and San Francisco to ban ATM surcharges. In November, a US
District Court judge blocked implementation of their bans, which are on
appeal to the Ninth Circuit Court of Appeals.
- Local
bans are under consideration in the councils of New York City and
Chicago. Other cities where campaigns have been launched include
Portland, Salem and Eugene, Oregon and Newark, NJ.
- In
February, Iowa petitioned the U.S. Supreme Court to review a decision
overturning its broad ATM regulations over state banks, which had
included an administrative ban on surcharging. While Connecticut’s ban
was overturned by the state Supreme Court in December, its ruling only
narrowly held that the Banking Commissioner had overstated his
authority when he had banned surcharging in 1995. A legislative
surcharge ban supported by state Attorney General Richard Blumenthal
has cleared a joint House-Senate committee and is being prepared for
House floor action.
The
report examines the legal case for state action and details how the
1978 Electronic Funds Transfer Act, which governs ATMs, explicitly
allows states and cities to regulate ATM fees.
The
report also describes the anti-competitive nature of ATM surcharging,
which has allowed banks to continue to raise fees. It points out that
the bulk of the benefits go to larger banks. Both PIRG and Federal
Reserve Board studies have shown that generally, larger banks impose
higher fees on all types of accounts on consumers.
"ATM
surcharges help the big banks get bigger, and if the big banks win, all
consumers lose, even if they don't use ATMs," added Mierzwinski. "ATM
surcharges make it harder for small, locally-owned, low-cost community
banks and credit unions to hold onto their depositors. If enough
customers switch to big banks, then the big banks will have even more
market power, leaving consumers with little choice in the marketplace."
The report makes the following recommendations:
- Cities, states and Congress should continue to seek to ban the ATM surcharge.
- Congress
should rein in the Office of the Comptroller of the Currency (OCC). The
federal bank regulator's abusive interpretations of its authority have
had a chilling effect on the ability of states and cities to regulate
unfair banking practices, including ATM surcharges, over-priced
checking accounts and triple-digit payday loan companies.
- Congress
should reinstate a requirement that the Federal Reserve Board publish
an annual study of bank fees, a requirement that the Congress allowed
to sunset in 1999.
"PIRG
is working with cities around the country to ban the unfair double
surcharge," concluded Mierzwinski. "We encourage Congress to act, but
if they won't consumers will have to rely on cities and states for
protection against this unfair fee."
