ATMs — Always Taking Money ATMs save banks enormous amounts of money because there are no employees to pay and maintenance of an ATM is significantly less than that of a full-service branch. Recent technological advances may further reduce costs of maintaining an ATM. Web-enabling of ATMs “ retrofitting them with Internet-based technologies “ are making ATMs cheaper and faster for banks to add new services to the machines and to operate and maintain them. (7) Banks save money when consumers use ATMs, but they have failed to pass that savings on to consumers. Instead, while customers are using ATMs in increasing numbers, they have been hit with escalating and creative ATM fees. Bank ATM owners encourage consumers to use ATMs by emphasizing that they are cost savers to consumers and banks and touting the size of their ATM networks while at the same time making it very expensive for consumers to use those ATMs. Banks are: (1) increasing existing fees, (2) inventing new fees, and (3) making it more difficult for account holders to avoid fees. NYPIRG’s 2004 ATM fee survey results show that banks continue to charge consumers very high ATM transaction fees and that bank surcharges are nearly universal.
When consumers use an ATM that is not owned by their bank (owned by another bank or an independent service operator ³ISO²), they typically pay two fees for that transaction “ the foreign fee and the ATM surcharge fee. Moreover, ATM surcharges create two flows of revenue for bank ATM owners: surcharge fee and interchange or network fee. A portion of the ATM fee consumers pay their own bank when they use another bank’s ATM (the foreign ATM withdrawal fee) is retained by their bank. The remainder is distributed by their bank to the network, which retains a portion and distributes the remainder to the ATM owner. Even if the consumer’s bank does not assess a fee (although 92% of the banks surveyed for this report do assess a foreign ATM withdrawal fee), their bank pays the network, which distributes a portion to the ATM owner. Thus, with surcharging, the ATM owner collects two fees for one ATM transaction: one from the network (indirectly from the consumer) and the other directly from the consumer and the typical consumer pays two fees: (1) the foreign fee their own bank charges them to use another bank’s (or non-bank ATM owner’s) ATM; and (2) the surcharge assessed by the ATM owner and deducted from the consumer’s account at the time of the transaction.
Private ATM owners became increasingly prevalent after 1996 when the two major U.S. ATM networks, Cirrus (MasterCard) and Plus (Visa) began allowing banks to surcharge for ATM transactions on their networks. After that, owning an ATM become a huge profit generator, instead of just being a cost saver, attracting private ATM owners to set up their own ATMs. While there are more ATMs than ever, as privately-owned ATMs have become as ubiquitous as those owned by banks, there hasn’t been price competition to make ATM transactions cheaper for consumers. Indeed, the average surcharge assessed by the both bank-owned and ISO ATMs included in this year’s survey is $1.55 per transaction. Significantly this flood of private ATMs caught federal and state banking and consumer regulators completely off guard: A glaring loophole exists allowing private ATMs in New York and most other states to operate with no licensing requirements and virtually no oversight. In fact, anyone can purchase an ATM and connect it to the banking networks without notifying the state banking department‹and you can buy one for as little as $250. There are real concerns for consumers and the general public when individuals and other businesses not overseen by banking regulators own ATMs hooked up to the national banking network. Because no one is regulating privately owned machines, it’s possible to use the machines for identity theft (9); and to evade taxes, launder money, and even fund dangerous and/or illegal activities with ATM surcharges ( 10). The private ATM trade association claims it can’t happen. However, there are documented cases of persons with financial fraud ( 11) and money laundering ( 12) convictions who purchased ATMs and connected them to the banking networks. These cases shine a spotlight on a huge loophole in the banking law. ATMs—Always Taking Money | Debit Card Confusion | Pre-paid Cards—The Priciest Plastic of All |
The Credit Card Trap
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