I appreciate the opportunity to speak on the issue of consumer fees charged for using an
automated teller machine.
I strongly support federal legislation to prohibit banking institutions and other companies that
own automated teller machines (ATMs) from charging non-customers for the use of their ATMs.
These point of transaction fees are unnecessary. Connecticut has banned such fees for several
years without any harmful or negative impact on banks or other financial institutions. ATMs in
Connecticut are as common as in other states. In fact, non-banking institution companies have
begun to establish ATMs in my state.
Not only are these point of transaction fees unnecessary, they are unfair. These fees
presume that consumers have a choice of whether to use ATMs that charge a fee. The reality is
that consumers who travel, either in-state or out of state, may not know the location of any other
ATM, let alone a no-fee ATM. Other consumers who choose to use a small community bank or
a credit union may not have a local ATM they can use without paying a fee.
Federal legislation is vitally necessary because Fleet Bank has filed a lawsuit against the state of Connecticut aggressively challenging the legality of our ATM fee prohibition and
arguing that such a ban is preempted by the National Bank Act. Federal legislation would clarify
our state's ability to enact such prohibition. In addition, federal legislation is necessary to ensure
that consumers are protected from such fees wherever they use an ATM. Because travelers are
particularly vulnerable to ATM charges, federal protection against ATM fees should extend to all
ATM's have greatly expanded e consumers' ability to access funds and conduct many banking
transactions that otherwise would require a person to go to a bank. There is no question that
ATMs provide consumers with a convenient way to bank.
ATM's also provide banks with a more cost-effective method of servicing customers,
ATMs reduce the need for tellers and other staff at financial institutions. Prior to the advent of
ATMs, people had to rush to a bank to deposit their paycheck and obtain necessary cash for their
week's Purchases. Banks needed personnel to handle these transactions that are now performed
by a machine.
Although ATMs have provided banks with a more efficient means of providing banking services,
banks have imposed various charges on non-customer usage of ATMs -- charges that are
euphemistically called "convenience fees." These fees are typically assessed by adding an extra
$1.50 to each ATM transaction. Thus, if the consumer wants to withdraw $20, the consumer's
account is charged $21.50. These fees are nothing more than an additional bite at the consumer's
financial apple. Over the years, banks have continually increased or expanded fees, generating
substantial revenue. Consumers are getting tired of being nibbled to death by bank late fees,
transactions costs, debit fees and other creative mechanisms for increasing profits at financial
Of the many fees that banks charge, point of transaction ATM fees are one of the most unfairly
burdensome to consumers. ATM fees are charged to consumers in many circumstances in which
the consumer may have no choice for accessing needed cash, One Connecticut state legislator
related an experience while traveling in Washington, D.C. where she found an ATM that charged
her for using the machine. Because she was not familiar with the area, she had no way of
knowing where another ATM was located and what fees she would be charged there.
Moreover, millions of dollars in fees are generated by the ATM industry. For example, the ATM
network - such as CIRRUS, PLUS or NYCE - charges banks using the network a monthly
transaction fee. The ATM owner charges the consumer's bank an interchange fee. A data
processing company, if used by the ATM owner, charges the ATM owner a processing fee. An
independent sales organization (ISO) may charge a transaction fee to the system or a bank for
arranging the placement of an ATM in a retail location. And many banks charge their own
depositors a fee for using another bank's ATM -- up to $1 for each use.
Although the ATM bank charges the consumer's bank and the consumer's bank may pass
along that charge directly to the consumer through a charge to the consumer's account, many
financial institutions and other non-bank ATM owners charge consumers additional fees at the
point of transaction. Consumers, in these circumstances, are paying double fees.
Banks have spent twenty years luring consumers into the habit of enjoying the convenience of
ATMs, a convenience that was initially free of charge. Now, more and more banks are using
ATMs as a source of revenue by charging for ATM use.
Further, the experience in Connecticut reinforces the view that point of transaction ATM fees are unnecessary for the financial health of banking institutions that own the ATMs. These fees have been prohibited under Connecticut law, yet there has been a proliferation of new ATM outlets in our state.
In 1995, the Connecticut Banking Commissioner issued an opinion -- with my advice and
concurrence -- stating that Connecticut does not authorize banks to charge consumers directly for
using an ATM- Rather, the law contemplates that ATM owners could charge the bank card issuer
for the cardholder's use of the ATM. The opinion was issued as a result of a request for
clarification of law by Fleet Bank, the largest banking institution in Connecticut. Fleet Bank
filed a lawsuit in January, 1997 in the United States District Court for Connecticut challenging
this interpretation of law and arguing that even if the Banking Commissioner is correct, such
interpretation violated the National Banking Act. Both Fleet Bank and the State of Connecticut
have filed motions for summary judgement on the issue of the correct interpretation of the state
law. We are awaiting a decision by the court. If the judge concurs with the Banking
Commissioner's opinion, both sides will proceed to brief the issue of federal preemption.
ATM charges continue to skyrocket. You have heard the numbers today: The General
Accounting Office found that the average ATM surcharge nationwide rose 50% to $1.50. The
United States Public Interest Research Group found that the number of banks that charge for
such services increased by 45% from 1997 to 1998. ATM surcharges also disproportionately
charged by large national banks. The USPIRG report found that 83% of large banks charged an
ATM fee and the fee averaged $1.35 while 63% of small banks charged an ATM fee, averaging
$1.16 and only 13% of credit unions charged an ATM fee, averaging $1.04.
Prohibiting the charging of ATM fees will protect consumers against being unfairly nickeled and
dimed -- or dollared. Banks would be allowed to recover their true costs through Clh charges
within the industry. These costs would be more equitably assigned through more balanced
negotiations between two banking institutions rather than through charges assessed to an
individual consumer who may not have a realistic chance to comparison shop.
Therefore, I support the legislative effort of Senator D'Amato to ban such surcharges nationwide,
I urge the committee to ensure that the legislation includes non-bank ATM owners, since there
has been an increase in the number of "nonfinancial institution" ATM owners. They should not
be given an unfair advantage.
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