ATM and bank charges: Free trade, or cornering the consumer?Early last month, when First Union and Fleet Bank announced plans to take advantage of a U.buy valium online no prescription. District Court ruling allowing them to levy a surcharge on use of their ATMs by non-customers, visit us was a big deal to consumers and small- to mid-sized businesses.And buy ambien online no prescription getting bigger. buy valium online no prescription.tate Attorney General Richard Blumenthal, who has gone on record opposing the surcharges, almost immediately responded by appealing the ruling and seeking ambien generic stay. this appeal,” Burke explained: “My position is strictly to interpret the law. We normally refrain from price control but, in my opinion, the law that was created which allows banks to own ATMs precludes surcharges.”
While, Burke and Blumenthal won a skirmish, a stay on ATM surcharges, an appeals court let the banks have their charges, at least for now. Opponents may have the last word according to Burke. The commissioner says that other options to stop surcharges are under consideration, including legislation.
Explains Burke, “Later, the legislators and the attorney general may work on a bill to preclude surcharges, but this kind of legislation is difficult to pass, as we've seen in Massachusetts [where a similar bill was defeated in July].”
Bankers from Connecticut's larger financial institutions are claiming that extra fees - particularly the ATM surcharges - are necessary to cover their costs. They point out that most states allow the second fee to be charged on ATM use by non-customers. They say they incur extra costs because they provide businesses and consumers with more - and more convenient - ATM locations, and they insist that they ought to have the right to recover those costs.
Blumenthal's response, in essence, is: baloney. He declares: “Their argument falls down in two places: If they want to recover costs, they should do it by charging the bank of the customer who uses their ATM, not the customer. And they're not just recovering costs as they claim; they're charging more than the cost of the service. So they're really creating a new revenue stream through the charges.”
So what? asks Philip Margolis, director of corporate relations for BankBoston, which operates 120 ATMs and about 65 branches in the state.
Margolis says that banks are businesses that deserve to make a profit just like any other business. “What business owner reading your paper will settle for losing money or even just breaking even on a service they provide?” he asks rhetorically, “And banks do provide a significant service through the ATMs, particularly the banks with large ATM networks.
“In fact,” Margolis adds, “at Bank Boston we plan to grow our ATM network, densifying in our core markets of greater Hartford, New Haven and Waterbury. However, the more regulations keep us from earning a profit, the less able we are to expand and provide more convenient banking options to our customers. That's our basic philosophy behind our entire fee structure.
“We work with our customers, business and individual, to make sure they have the accounts they need, and some of those accounts have fees for services,” Margolis says. “But we believe our customers get what they pay for. The fee structure is meant to work for the customer and earn money for the bank.”
If the ATM controversy does nothing else, it is drawing attention to the growing number of fees charges by banks, particularly larger institutions such as First Union, Fleet and BankBoston.
Indeed, on a national basis, the number of banks that charge the extra fee on ATM use by non-customers has risen from 39 percent in 1997 to 64 percent in 1998. And ATMs aren't the only services “under charge.”
Both individual and business consumers are noticing - often with dismay, if not downright outrage - that they are being charged, or charged more, for services such as banking-by-phone, banking on-line, checks, and even bounced checks.
But, as Margolis points out, in a capitalist society where businesses - including banks - exist in essence to earn profits, what's the big deal about banking charges?
If the big banks want to create a revenue stream by charging for services, why shouldn't they? After all, the consumer can always move the account to another bank, right? And if the consumer or businessperson is willing to pay for the convenience of a nearby ATM, what's wrong with that? In the end, won't the marketplace decide the issue by choosing banks accordingly?
Indeed, Margolis counsels individual and small-business consumers to take care in choosing a bank. He suggests that the potential customer, “Consider what features you want in your business or personal account, and look for the bank or account that meets those needs. When it comes to ATMs, you have the option of using your own bank's ATM to avoid charges.”
That's not the point, according to Blumenthal, who believes that the state's attorney general must be “an advocate for the consumer and a voice for people and businesses, especially small businesses.” He contends that the charges give the banks an unfair advantage over the consumer - and, in some cases, over other banks.
Explains Blumenthal: “These fees are not only anti-consumer; they are anti-competitive. Because consumers want to avoid the fees, they may choose to change banks in favor of one of the larger banks so they can use the ATMs without incurring a surcharge. That's not fair to some of the medium-sized banks or the smaller community banks.”
Indeed, many of those small to mid-sized banks agree. And some have decided to do something about it. In states like Massachusetts - where banks controlling more than 65 percent of all ATMs have already moved to implement surcharges after anti-surcharge legislation failed in July - and California, groups of community and medium-sized banks have joined together to create ATM “free” zones where anyone can use their ATMs for the same cost as existing customers.
In Connecticut there is no formal network, but bank representatives - particularly from smaller banks - won't rule it out.
For example, Donald Kanoff, senior vice president of Milford Savings Bank, a small community savings bank with five ATMs and three branches, says: “We're watching the pilot (ATM free zone) network in Massachusetts very carefully. If it succeeds as I understand it, I definitely think it should be tried in Connecticut, and I can't imagine why any community bank wouldn't want to join. We would certainly consider it.”
Kanoff is not reticent about expressing his opinion of the surcharges. “We're a small community bank, and it's not in our interest or in the interest of our customers to charge the fee,” he says. “We don't plan to consider it if the stay should be lifted and the appeal fail. We're willing to absorb the fee; we have a different motive than the larger banks. Basically, we aren't looking to stick it to our customers.”
Paul McCraven of New Haven Savings Bank's Community Development & Public Relations Office agrees. Calling NHSB, with its 18 ATMs and 33 branches, “the last hometown bank,” McCraven says, “We have no plans to implement a surcharge, and I think part of the reason we're willing to absorb the cost of ATM use is that we have a strong community focus.”
Even some of the larger banks that have made their reputation on consumer advocacy, seem to be taking advantage of the “big, bad big banks” image as anti-consumer by offering exceptional deals to attract new - and mollify existing - customers.
For example, Bridgeport-based People's Bank has already won over new consumers by joining with the Stop & Shop chain to offer “banking with groceries.” Offering the convenience of seven-day-a-week banking at the grocery store was no coincidence.
“We've made a conscious effort to have consumers look at us as the best overall bank for all their needs, whether that means seven-day banking at the grocery store or providing all the traditional services at our branches,” affirms Peter Scotch, first vice president of People's, a medium-sized bank operates 175 ATMs and 126 branches.
“When it comes to fees, our philosophy is not to focus so much on one fee, but to provide the widest possible range of banking options for our customers with a fee structure that is reasonable relative to the services we offer,” Scotch explains. “Our central goal is to build a level of trust with our customers.”
And to build the level of customers as well. People's recently offered a nearly unprecedented five-percent interest rate on savings accounts opened at select Stop & Shop-based banks. Opening the account required a mere $25 (that's right, twenty-five dollars), and the rate will be good through the end of the century, according to a People's representative at the Old Saybrook Stop & Shop branch. People's also offered a no-fee checking account in a collaborative promotion.
Webster is another bank that is building a reputation - and growing its customer base - on a claim of customer focus, particularly if the customer is a small business or individual.
Explains Webster spokesperson Chris Capot: “Since small businesses are considered those with revenues of up to $1 million, many of our small-business customers may also function like a consumer account. Now, our ATM network (174 in Connecticut) is primarily for the benefit and convenience of our customers and, currently, all things being equal, we're able to absorb the cost of non-customers using our ATMs without that cost impacting our customers.”
This means that at the current rate of use by non-customers, Webster can afford to bear the cost. However, Capot adds that Webster will have to reassess its surcharge policy if increased use of surcharges by other Connecticut banks result in more non-customers using Webster ATMs. If that number increases to the point where the cost of non-customers using the ATMs begins to negatively impact customers, Webster may consider a surcharge.
“Basically, our philosophy on fees is to be fair to our own customers while receiving fair compensation for the many services we provide,” Capot says.
Citizens Bank does charge the so-called convenience fees in other states where it operates, including Massachusetts, and will explore the issue of charging in Connecticut if the stay is lifted, according to Citizens' spokesperson Chris Curran.
“Because we don't and haven't yet charged the convenience fee in Connecticut, where we operate just under 50 machines, we haven't taken a hard look at the issue,” he explains. “But in Massachusetts, where we do charge the convenience fee, I believe our thinking is, 'Why should our customers pay for our non-customers to use their ATMs?'”
And First Union, the bank that led the surcharge charge in Connecticut by implementing a non-customer use fee on its 109 ATMs in the state, is also taking a conciliatory stance - at least for now.
Spokesperson Leah Colihan explains, “While we do not feel that the ruling [against the surcharge] applies to First Union, in the spirit of good government and the process, we have voluntarily suspended the imposition of convenience fees on non-customers who use our ATMs until the matter is resolved.”
The bottom line is that, one way or another, someone's going to pay for services: If a bank absorbs the cost of ATM fees, it's probably because at the current rate of non-customer use, the bank is able to cover the cost through other income. As Margolis suggests, banks are in business to make a profit, and most banks - no matter how consumer-focused - need to pay for the services they provide, and, it is hoped, make a profit.
The jury's still out on whether Connecticut will allow surcharges, but the stay is on. Still, mega-banks like Fleet and First Union aren't exactly running for cover - not to mention reducing or eliminating fees - as their smaller competitors nip at their heels to steal market share.
But as long as the larger institutions continue to impose an increasing number of increasingly costly fees, they can bank on having the attorney general as a formidable adversary.
Blumenthal, who was credited with what he calls “shaping” the Shawmut/Fleet merger by directing the merged entity to give up a block of community-based bank branches to Webster Bank, concludes: “I believe in the free flow of competition in business, but this office exists to ensure consumer protection. That's why we oppose the surcharge
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