Consumer Payment Card News


The Massachusetts Joint Committee on Banks and Banking continued hearings on a proposed legislative ban on ATM surcharges. BankBoston testified yesterday that it has invested $100 million over 10 years in its ATM system and spends about $10 million per year to operate its 1,000 ATMs. The bank said ATM use by non-customers now represents about 25% of total usage and is growing. Nevertheless BankBoston pledged yesterday to delay initiating ATM surcharges for nine months, to provide clear disclosure of fees, to charge reasonable fees, to continue serving underserved markets and to pass on most of the revenues generated by non-customers to actual customers by reducing other account fees.

Today at a public hearing and meeting of the Joint Committee on Banks and Banking, BankBoston offered a groundbreaking pledge to the committee which is considering a proposed legislative ban on ATM surcharges. Emphasizing that free-market pricing, rather than price controls, is the best way to ensure a competitive marketplace with many choices and the continued proliferation of ATMs, BankBoston said if a ban does not take place it would adhere to and promote a set of principles in the banking industry designed to treat ATM users fairly and responsibly.

Surcharging, or as most banks more accurately call it, a non-customer convenience fee, is the practice of the owner of an ATM charging non-customers for the use of that machine. Currently nationwide, a majority of all ATMs utilize this fee; it is in place in at least 30 states, and legislation to prohibit the fees has been debated and defeated in eight states, with two states pending. Fifteen states actually put new laws on their books to explicitly permit the fees and encourage competition and the installation of new machines.

BankBoston, which has invested $100 million over the past 10 years in its ATMs, spends nearly that much each year operating them. The company, which operates ATMs at 1,000 locations in Massachusetts, said its own customers will have to continue to subsidize the use of its ATMs by non-customers if it is not given the opportunity to assess non-customers directly. Twenty-five percent of all transactions at BankBoston ATMs are non-consumer transactions, and that number is increasing–up 18 percent in the last year.

Thomas J. Hollister, executive vice president, and director of Consumer and Small Business banking at BankBoston, presented testimony at the hearing that outlined five groundbreaking principles that go beyond what any bank in the nation has articulated when considering the implementation of a non-customer convenience fee.

The commitments are:

1. To provide clear, meaningful disclosure of convenience fees for non-customers as well as the ability to cancel transactions. 2. To pass on most of the revenues from any non-customer

convenience fees to our customers in the form of reducing our own “foreign” charge for the use of other banks’ ATMs, as well as reducing other account fees.

3. To charge only fair and reasonable charges for non-customer convenience fees.

4. To continue to serve underserved markets by ensuring fair access to ATM machines in these areas.

5. To delay initiating non-customer convenience fees for at least nine months to give the market additional time to evolve competitively and BankBoston time to prepare for all of the above.

Addressing concerns that such a fee would cause customers of smaller banks to shift to larger banks to avoid paying the noncustomer convenience fee, Hollister said, “Evidence from across the country where non-customer convenience fees have been in place indicates there has been no appreciable loss of market share from small banks to larger banks. The Massachusetts market is already highly competitive. Small banks who are concerned about the impact of non-customer convenience fees are successfully developing “fee-free” alliances, and consumers have a number of viable banking options at their disposal to avoid paying this fee–tellers, cash-back at point of sale, checks, and so on. That’s the way the free market should work–and it is working. We should avoid taking hasty action that would interfere with the market, impede investment in more convenient ATMs, and lessen consumer choice.”

BankBoston (NYSE:BKB), with assets of $66.1 billion as of June 30, 1997, was founded in 1784 and is the 15th-largest bank holding company in the United States. BankBoston is engaged in: consumer banking in Southern New England; financing to selected corporations regionally, nationally and internationally; and full-service banking in key Latin American markets. The corporation and its subsidiaries operate through a network of offices in the United States and through more than 100 offices in 23 countries in Latin America, Europe and Asia, the third-largest overseas network of any U.S. bank. The corporation’s common and preferred stocks are listed on the New York and Boston stock exchanges.

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