Emboldened by a complacent Congress and regulators who serve as little more than industry cheerleaders, banks continue to pile more fees on consumers.
The latest evidence of the fee gouging comes from a nationwide survey conducted by the U. S. Public Interest Research Group which found that surcharges imposed on automated teller machines (ATMs) have nearly ripled over the past five years for consumers who use an ATM not owned by their bank.
In reality, the ATM fee structure represents a blatant double-dipping scam at the expense of consumers who are only attempting to gain access to their own funds. When consumers use another bank’s ATM dubbed by the industry as a “foreign” ATM — they pay a fee to their own bank plus the surcharge imposed by the ATM’s owner.
According to the data collected by U.S. PIRG, this two-handed grab by the banks is costing consumers an average nationwide of $2.86 per transaction in 2001. In 1996, before the surcharges were slapped on, the cost was $1.01 per transaction. Even the surcharge is not satisfying the appetite of many banks. Eighteen percent of banks are now adding an annual “rental fee” averaging $13.76 for use of the ATM card.
As noted in earlier PIRG surveys, big banks, despite years of record profits, continue to be the leading offenders in imposing higher fees. Twenty-four percent of the big banks, for example, have started imposing annual rental fees for use of an ATM card compared with only 12 percent of small banks. ATM fees charged by big banks averaged $3.07 against a national average for all banks of $2.86.
The average big bank surcharges in 2001 were $1.55, up from $1.42 in 1999. Small bank surcharges averaged $1.36, up from $1.30 in 1999. Credit unions, only half of which imposed any surcharge, were the lowest with surcharges averaging $1.24 in 2001, up from 98 cents two years ago. Ninety-seven percent of the big banks surveyed by PIRG impose surcharges. To their credit there are a handful of banks, like the Amalgamated Bank of New York and Washington, D. C. (founded 75 years ago by the Amalgamated Clothing and Textile Workers Union), which continue to refuse to become involved in the surcharging schemes.
The bank fees skyrocketed while the Banking Committees of the House of Representatives and the U. S. Senate devoted most of their agenda over the past three Congresses to legislation to provide banks, securities firms and insurance companies with vast new powers and lucrative profit centers.
Efforts by a few progressive Members of Congress, like Representatives Maxine Waters of California and Bernie Sanders of Vermont, to halt the fee gouging were tossed aside by Committees which were clearly more interested in fulfilling the wish list of bank lobbyists than in protecting consumers. With this blatant pro-bank attitude prevailing in Congress, it is little wonder that the banks pile new fees on consumers
But there is evidence of a grass roots movement that may change Washington attitudes. San Francisco and Santa Monica, California, for example, have banned ATM surcharges, but their efforts have been blocked pending an appeal. Iowa continues to enforce its ban against surcharging and cities like New York and Chicago are considering bans.
Unbelievably, these citizen initiatives at the local level are facing major obstacles thrown up by federal regulators who feel their first responsibility is the care and feeding of the banks. In battles to preserve their surcharges, banks have been aided and abetted by friend of the court briefs and agency opinion letters prepared by a federal regulator, the Office of the Comptroller of the Currency (OCC) which long has been aggressive in preempting state consumer protection laws. OCC has also proposed amendments to some of its regulations to give greater strength to the banks attacks on the San Francisco and Santa Monica ordinances.
In addition to local ordinances, several networks and alliances of small banks and credit unions are marketing their own “no surcharge” and “selective surcharge” policies. The New England SUM Program, an alliance of several hundred community banks with over 1,700 ATMs, now has members in New York, Ohio and Puerto Rico. Similar alliances include the Pennsylvania Freedom Alliance, the Louisiana area Community Cash Network and numerous credit union networks. Members of these alliances do not surcharge each others’ customers.
Despite these commendable efforts, the great majority of citizens are going to continue to be faced with rising bank fees. Members of Congress, particularly those on the House and Senate Banking Committees, need to get some strong messages of outrage from consumers who are being fleeced daily by rising ATM charges and other fees. And Congress needs to rein in unwarranted efforts of federal regulators, like OCC, to
preempt local consumer protection laws. After all, OCC is supposed to be a federal agency that protects consumers, not just banks.
Until heat can be built under the Congress and the regulators, consumers need to avoid surcharges where possible by using ATMs only at their own bank or using machines with a “no surcharge” logo. As PIRG recommends, bank at a credit union, not at a bank if possible. Or consider a community bank to avoid the higher fees imposed by big banks.
High bank fees are not inevitable. They have become easy profits — unearned profits — for the banks. They will continue to rise unless enough citizens sound off and let the Congress and state legislatures know enough is enough the money and lobbying power of the banks notwithstanding.