Banks Sue to Halt Curbs on ATM Fees
Making good on their promise, California bankers filed suit Wednesday in federal court to overturn a ballot proposition approved overwhelmingly by San Francisco voters to outlaw the ATM surcharges that many banks charge non-customers.
The passage of Proposition F on Tuesday made San Francisco the first city in the nation to curb--by citizen initiative--automated teller machine fees. Wednesday’s lawsuit also targeted Santa Monica, where the City Council passed a similar law last month.
With a small number of votes still to be counted, the San Francisco measure was winning approval by a 62% margin, according to Foster Tucker, spokesman for the county Department of Elections.
“Voters, the people who actually pay these fees, spoke loudly and clearly to banks who charge them,” said Jon Golinger, consumer program director of the California Public Interest Research Group, a co-sponsor of Proposition F. “What they said is ‘Hey, you greedy bankers, we’re smart, we’re angry and we’re ready to put a stop to this practice.’ ”
Proposition backers predicted that voters throughout the nation would follow suit with measures of their own against so-called “nuisance fees” levied by the banks, thrifts and credit unions.
Last month, the Santa Monica City Council voted to join the states of Iowa and Connecticut in banning such ATM surcharges. The beach city has been contacted by jurisdictions nationwide that are considering similar prohibitions.
A disappointed spokesman for the California Bankers Assn. said Wednesday that the battle over ATM fees is far from over. Banks spent heavily in an attempt to defeat the measure.
“We’re obviously not happy with this, and we’re taking it to court--just as we promised all along,” said John Stafford. “This is not a nickel and diming of the public. It’s a legitimate business practice.”
At a hearing Wednesday in San Francisco, lawyers for Wells Fargo and Bank of America sought an injunction to block the San Francisco and Santa Monica laws. Santa Monica’s ordinance is scheduled to take effect Nov. 11, and San Francisco’s would be implemented 10 days after the Board of Supervisors certified election results. Another hearing on the injunction was scheduled for Nov. 15.
In 1996, banks and other financial institutions nationwide began charging fees--typically $1.50 in California--for non-customers to use their ATMs. Most of the state’s 20,000 ATMs currently levy such fees. The ballot initiative would continue to allow surcharges at cash machines not owned by financial institutions, such as those in gas stations and convenience stores.
Industry officials say the tens of millions of dollars generated from the surcharges allowed banks to double the number of ATM outlets nationwide. “The result was an enormous increase in customer convenience, albeit at a price,” Stafford said.
“Still, 75% of all ATM transactions are by bank customers who don’t pay any fee,” he added. “We don’t think it’s at all unreasonable for non-customers to pay an access fee.”
But Golinger said most San Francisco voters thought otherwise.
“They saw through all the banker baloney,” he said. “These banks talk about service, but what’s the service of paying so much just to get your own hard-earned money back?”
Banks already collect 40 to 50 cents from non-customers’ banks with each ATM withdrawal, he added. “It’s the banking industry’s dirty little secret--these banks are all double dipping, charging twice for the same little service.”
Stafford called the fees the cost of doing business.
“These kind of convenience fees are a time-honored capitalist tradition,” he said. “Banks are in business to make a profit. We’re not utilities, so why should we have to justify this practice on the basis of cost? Nobody asks the Gap to justify the cost of its sweaters. So why should we?”
