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.
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Deacon Bradley says
It never ceases to amaze me the things that require regulation. Instead of “protecting consumers” from big-bad corporate America, perhaps they should just remind us to vote with our feet (like you pointed out). I just finished the arduous process of ditching Bank of America in favor of a local credit union because I disagreed with their business practices. Was it easy? no. Did they notice? probably not. I believe in Ghandi’s method though, “be the change you want to see in the world.”
I like the other examples you listed, hah!
I don’t like ATM fees… and therefore I don’t pay them. ATMs cost money, though, and operating an ATM network so some other bank can use it for free or 50 cents is probably not in any bank’s best interest. None of government’s business.
This is ridiculous. The banks are not going to just let go of those fees (just like they didn’t react well when CARD was enacted). Instead of charging to those few who don’t use their own atm they will charge everyone XX amount for having an account.
We might very well see a reduction in the number of ATMs out there. This could be a particular issue for credit unions (which I suspect may rely more heavily on non-branch ATMs operated by third parties).
Harry Sit says
Ted – That’s why I don’t understand why credit unions are against this. Not having a large network of ATMs in the most visible locations is one of the biggest challenge for convincing people to switch from a large national bank to a credit union. If the ATM fees are capped to 50 cents, it’ll be much easier for credit unions to simply reimburse their customers the ATM fees and make that issue go away.
Edwin | Finantage says
This change sounds like it’s more political than anything else. I understand trying to curb predatory lending tactics like insane credit card rates or payday loans in general. But ATM’s really do offer a tangible service.
TFB – I assumed that the credit unions might be able negotiate prefential discounts with the ATM operators already.
That may be a bad assumption, but if it were true, then the credit unions might like the ATM operates to see as much incentive as possible to extend their networks (i.e., high profits from other customers means more ATMs for the credit unions’ customers to use).
Even if the assumption is incorrect, lower fees may lead to fewer ATMs for credit union customers to use, which might drive credit union customers to banks with bigger in-house networks.
My husband has been in the ATM business for 14 years. The argument is that the processing only cost .$32, so I guess they figure the rest is gravy. The problem is that none of these Senators have ever worked in business, have run a business or had to make cuts to make a business profitable. The ATM machine itself cost money, the money that is in the machine costs money (either through revolving credit which you pay interest on or an armor car service), the merchant who allows the machine to be in their place of business is paid a commission, the employees to service the machines, the parts to keep the machines in working order and then there is a small profit left over for us to feed our family. Processing is the least of our worries.
As stated in the above article, the consumer has to agree to the fee before the use of the service. Why is it government’s job to make that decision for the consumer? And yes, if this goes through we will be out of business. There is no way we could run our business with those fees, so that means less machines out in the field. We own 200 and we know of other companies that own 600-1000. You may think well the banks will just put out more. Merchants are not going to allow their floor space to be taken up without compensation and I don’t know how well those banks will deal with that. Also, the bank will just pass those fees onto the consumer in another form. So you still have the problem just under another name.
These Senators are just using this to make a claim they are working for the regular guy, when, with this bill, they are putting the regular guy out of business. We have a lot at stake. If this bill goes through, we will lose pretty much everything. I hope they have a bailout for us in that bill, because we will have to file bankruptcy because of the loans that are out on these machines we have in the field. And who will buy them? This bill is a joke. Maybe we should require our high government officials to have a real job before spending the majority of their lives in politics where evidentally it is nothing but unicorns and rainbows.
If you go back to the beginning of ATMs the banks wanted them because they saved money by needing fewer tellers but as in all things what is once a cost savings must become a profit center of its own.
SoMo put it perfectly. It takes a lot of money and time to operate and run a ATM business. If this gets passed we will all have to close shop. You will be forcing hundreds of thousands of people out of work. Not to mention all the merchant owners that rely on there ATM’s to bring them extra business. This is going to effect so many people all across the board. This fee is not forced on anyone. Anybody has the right to go to there own banking institution to use the ATM’s for free. Other people agree to these fees b/c it’s a convienence to them. If these surcharge fees were forced on people and they had to pay no matter what. That might be a different story but they accept or decline the fee at there own will. Isn’t there much more serious issues and problems these Senators should be devoting there time to. They have no idea what they are doing. This is just nonsense!!
SoMo and JZH are correct – all this legislation will do is put a lot of people out of work and remove many ATM’s from areas that banks do not want to service. I guess when people start using check-cashing services the fine legislators in DC will shut down those businesses as well.
I own an ATM business. We provide retail ATMs to small merchants. If this passes I will be out of business, I will be on the unemployment line with my employees – thanks for protecting the little guy Washington!!!
This is FEDERAL PRICE FIXING…what has happened to this country?
As this is going on, MasterCard has decided take half of the money businesses like mine used to be compensated for running transactions on their network.
I hope everyone enjoyed the convenience of cash while it lasted. We’re going to be back to the days of standing in line at our bank to cash a check again real soon.
We are getting hit from all sides, government and Wall Street are it again. Who gave these idiots the keys to the kingdom…we did!
Wake up America, your country is falling apart!
Elections have consequences.
I have to agree with SoMo as well. My partner and I, a 36 yr. old woman and a 40 yr. old divorced mother of 2, just started our ATM business in July of 2009.
If this amendment passes our small business will be OUT OF BUSINESS.
SoMo hit the nail on the head when she mentioned all of the fees we are responsible to pay monthly to run our ATM business. And we don’t get 1000’s of hits per month like the big banks do, so therefore we will NOT survive at all on .50 per transaction.
The fee that is charged on atm’s is a convenience fee. You are paying for the convenience of using MY money until your money clears back into my account. Because after all, if you really were using your money then a) you wouldn’t be paying a fee for it and b) there’s be no reason for a third party to have to take money from your account and then deposit it into my account…right?
So we can all agree that you’re not TRULY withdrawing your own money, your borrowing my money for a very short period of time.
And atm fees are 100% avoidable by consumers. All they have to do is Plan their days better, that’s it. Use their banks atm or better yet go to their bank and make a withdraw….no atm fees charged then.
Plus, all consumers have the option of saying NO, i will not pay that fee and therefore their transaction will be canceled and they can go to their bank, go to their banks atm or pay for whatever they want to buy with a different form of payment.
ATM surcharges are not a hidden fee that sneak up on consumers…it is Well documented what the fee is and they have to agree to it in order to be charged for it. Period.
For the record, I do not use atm’s because I prefer to use my own money for free then to pay a fee to borrow someone else’s money for a short period of time……so how do I avoid paying atm fee’s? I plan my day accordingly around the amount of money I need. 🙂 It’s really simple actually.
This is the worst amendment ever……since when do we start telling businesses what amount of profit they are allowed to make? Unbelievable. Are we living in another country right now or is this still the United States of America?
Atm networks are natural monopolies. The atm monopoly screws the most competitive online banks because inefficient traditional banks – like credit unions, bundle their infirior banking services with the atm and charge predatory prices for outsiders. This is great legislation.
John Q. Public says
First, I think it highly unlikely that “hundreds of thousands” of people will become unemployed if private ATM operators go out of business. Exaggeration does little to help your cause.
Second, if as previously stated the approximately $3.00 fee charged is because the consumer is using the ATM operators money while the ATM operator is awaiting reimbursement for the transaction, then the effective APR is probably worse than that offered by payday loans.
I hope this bill passes if only to see few ATM eyesores on every street corner.
Steve Basile says
My son has an ATM business. They are talking about banks charging up to $3 for a transaction. My son and most people in the ATM business charge no more than $1.75 a transaction. Why don’t they just target the banks to lower their fees? This is how my son earns a living. He supports his family with his business. If this bill passes, he and all the other people in the ATM business will be wiped out. It’s impossible to make a living with a 50 cent transaction fee. What about paying exorbitant prices at sporting events for food and drinks? Or better yet, what about banks only giving .75 and 1 % interest on saving accounts? Why isn’t our illustrious senators complaining about that?
John Q. Public says
Steve: I think there are at least two solid reasons why senators are picking on ATM operators:
1. Because they can; and
2. Because they are up for re-election and they figure that they need the votes gained from appearing to be consumer-friendly.
Personally, I do not think the provision will remain in the final bill.