The problem |
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What's wrong with ATM surcharges? There are three things wrong with ATM surcharges. They are deceptive, anticompetitive, and unconscionable. ATM surcharges often are not adequately disclosed to consumers, and consumers frequently don't realize that they have a choice (apart from choosing not to use an ATM at all, which isn't a realistic option for many consumers). The national ATM networks and most regional networks (along with laws in some states) require that ATM surcharges be disclosed both by a sign on or near the ATM, and by a notice that appears on the ATM screen, giving the consumer an opportunity to cancel the transaction before being obligated to pay the surcharge. But the sign usually contains relatively small print and is buried among other signs on the machine; often the signs are defaced, obscured, or removedentirely. Worse yet, the language of both the sign and the on-screendisclosure is often confusing, and many consumers don't realize that the surcharge isn't the same as the fee they've already agreed to pay their own bank.
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That's a ridiculous argument -- the number of transactions hasn't increased tenfold, and if it did, economies of scalewould lower the costs significantly. Furthermore, the interchange fees that banks collect for each ATM transaction are more than enough to cover the marginal costs of additional ATM transactions. Banks make a profit on each noncustomer ATM withdrawal, and they use those profits (along with the surcharges that they impose) to subsidize the services that they provide to their own account holders.
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Even if ATMs truly were merely a convenience, the "free market" argument is flawed. The ATM market isn't particularly competitive;large banks dominate the regional networks, most of which possessa geographic monopoly. Network "nondiscrimination" rules often prevent smaller banks and credit unions from fighting back against large banks that impose surcharges -- that's ironic, because mostsurcharges are themselves discriminatory, in customers of some banks pay more to use an ATM than customers of other banks. Large banks tend to control the most desirable ATM locations with exclusive contracts with chain stores and shopping centers, leaving smaller banks unable to compete. And most importantly, the ATM market has significant external effects on competition in the overall consumer banking market. Even if the ATM market would support high ATM surcharges with true competition, such surcharges still have anticompetitive effects on the consumer banking industry as a whole.
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Banks impose ATM surcharges because of their market power, not because of their actual costs of doing business. The total cost of withdrawing money from an ATM more than tripled in many places
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The consumer banking industry is already highly concentrated,
and is becoming more so as a result of mergers and acquisitions.
ATM surcharges make the situation worse by reducing consumers' banking
options and pressuring them to shift their accounts to large banks. |
ATM surcharges bear little relationship to banks' costs, generating windfall monopoly profits for large, already profitablebanks; they also tend to be highly deceptive. The average American family now pays several hundred dollars per year in ATM fees, including surcharges. Because surcharges areimposed as a flat (per-transaction) fee, they have a highly regressive effect; the poorest consumers end up paying the highest proportion of their income.
ATM surcharges also may have other undesirable effects. For example, the windfall profits available to those who impose surcharges tends to promote the installation of ATMs in unsafe locations, and at the same time provides consumers with a financial incentive to withdraw more cash at a time; both of these phenomena may produce an increase in ATM-related violent crime. |
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1999/11/11