No matter how legitimate the business case is, the issue of ATM surcharging is moving to the front burner with consumers and there are rumblings this morning that federal legislation banning such fees is imminent. For example the Senate Banking Committee will hear testimony this morning from a number of industry representatives including the executive director of the EFTA. The EFTA says consumers do not have to pay ATM surcharges if they shop around. To bolster their argument the EFTA says a recent study showed 60% of the surcharge fees of one major network were paid by only 18% of the cardholders. However the fact remains the number of bank institutions levying fees to non-relationship customers for ATM use is growing exponentially. And compounding the problem is the industry’s inability to communicate the growing expenses of servicing ATMs. Instead the industry has been taunting consumers with its weak advice to “vote with your feet”.
The nation’s leading electronic payments trade group will answer a call to testify before Congress on the ATM surcharging controversy with a plea to let market forces decide the issue.
Surcharging is the practice of ATM owners assessing a fee on ATM users, typically non-customers. Several congressional committees are deciding whether the practice should be regulated.
“The Senate Banking Committee has invited the Electronic Funds Transfer Association to testify on the results of its executive-level Surcharging Task Force, which spent several months analyzing the surcharging issue,” said H. Kurt Helwig, EFTA executive director.
The industry task force, which included banking, ATM network and consumer representatives, concluded that the free market appears to be pr.ply regulating surcharging, but that a number of issues require further analysis.
According to Helwig, these include:
— The long-term effect of government controlled pricing
— How to quantify the value of ATM convenience
— Cost of providing convenience
— Implications to consumer of government intervention
— Competitive implications
“The fact remains,” noted Helwig, “that there are many options for consumers to minimize, or even avoid ATM surcharges.”
These include using ATMs that do not charge access fees, making larger and/or less frequent cash withdrawals, getting cash back at point-of-sale terminals, which do not surcharge, or using ATM cards, instead of cash for retail purchases, according to Helwig.
“Government intervention should be the court of last resort when there is no other way to protect the public interest,” Helwig said.
“But the bottom line is that this appears to be a case where the public has a variety of options short of regulation, and appears to be using them,” Helwig said.
He cited statistics which show that point-of-sale no-fee usage of ATM cards is up, and that consumers who use ATMs appear to be making fewer transactions of larger amounts.
“In one study of a major ATM network, according to Helwig, 60 percent of the surcharge fees were incurred by only 18 percent of the cardholders. In another survey, 60 percent of ATM cardholders said they had changed their ATM habits to avoid convenience fees, he added.
“Seventy-two percent of those surveyed said they had not paid a surcharge fee in the last 60 days,” said Helwig. “These consumers are voting with their feet, which is way a free-market system is supposed to work.”
The complete findings of the EFTA Surcharging Task Force will be released at the group’s 20th Anniversary Legislative and Technology Summit, June 18 in Reston, Va.
“Surcharging is a complicated issue,” said Helwig. “You cannot sum up the effect on consumers one way or another in a 10-second sound bite,” he said. “I wish it were that simple.”
The Association’s complete written testimony to the Senate Banking Committee will be available Friday, June 12 at the group’s site on the World Wide Web (http://www.efta.org).
Now in its third decade, the Electronic Funds Transfer Association is the nation’s premier inter-industry trade group for the electronic payments and commerce industry. Its 900 members include Comerica Bank, the CIRRUS and PLUS ATM systems, and ADVANTA Corp.