Wall Street Journal reported that some Senators proposed to cap the ATM fees at 50 cents in an amendment to the financial reform legislation.
The financial reform bill being considered in the Senate is S. 3217 Restoring American Financial Stability Act of 2010. The amendment that the newspaper referred to is S.Amdt. 3812, sponsored by Senators Tom Harkin (D-Iowa), Charles Schumer (D-New York), Bernard Sanders (I-Vermont), and Tom Udall (D-New Mexico). The meat of the amendment says:
(D) REGULATION OF FEES.–The regulations prescribed under paragraph (1)shall require any fee charged by an automated teller machine operator for a transaction conducted at that automated teller machine to bear a reasonable relation to the cost of processing the transaction, and in no case shall any such fee exceed $0.50.
I find this proposal very interesting. I see our Senators are very concerned about consumers paying high ATM fees. The prevailing ATM fee has crept to $3 per withdrawal.
I don’t like ATM fees although I’ve paid the fee many times without hesitation. My bank reimburses me all ATM fees, but I’m sure I’m compensating them in other ways which end up paying the ATM fees. If the ATM fees are capped, I will pay less.
Time Magazine’s It’s Your Money blog reported that credit unions are against this. I’m confused. I thought the credit unions are the good guys. They are in this price gouging game too?
On the other hand, are ATM fees of such importance that requires legislation? How about requiring all banks to pay interest on deposit at a minimum rate of the prime rate minus 2%? Or capping the interest rate on car loans at 5-year Treasury yield plus 3%? That’ll put far more money in the consumers’ pockets than capping the ATM fee.
The fundamental issue comes down to regulating prices. The ATM fee is a price for a product or service. Who should set the price for this product or service? If the price for a product or service is too high, how bad is it if the consumer simply refuses to buy that product or service? If they accepted the price by pressing Yes, is there a problem?
The ATM fee is the most transparent bank fee. Everybody knows about it. If you don’t know beforehand, the machine shows the fee and asks you if you are OK with the fee. If you don’t want to pay the fee, press No or Cancel. How is it different from anything else that has a price tag?
If a high profit margin is the problem, I can think of some other overpriced products that badly require Congressional intervention:
Jewelry – Too expensive. No practical use. Too much profit made by the stores and the industry.
iPad – So many people want them. The price does not “bear a reasonable relation to the cost.”
First Class air ticket – Same plane, just a larger seat and maybe a meal. No reasonable relation to cost.
Soft drink at sporting events – $4? Are you kidding me? That’s higher than the ATM fee!
I’m sure you have your list of overpriced items too. Tell your Senators about them. Make democracy work.