No Lemonade From ATMs
In his recent book-length satire “Why Not Me?,” comedian Al Franken poses as a presidential candidate running on a single-issue platform: abolition of that scourge of modern urban life, the ATM surcharge fee.
Since it is his book, Franken rides this one-horse gag all the way to the White House. Unfortunately, Franken’s wild, and totally fictitious, political satire is being mistaken for political science in California.
Following the Franken campaign model, local elected officials have fueled passage of ATM surcharge bans in Santa Monica and San Francisco. City council members in San Diego and Los Angeles are also now promoting the idea.
While politically popular--as Franken’s book notes, “Who would be for higher fees?”--promising to prohibit ATM surcharges is also a bit like candidates for 4th-grade president promising lemonade in the drinking fountains. In this case, advocates for the ban would have you believe that the measure will result in some type of ATM nirvana, where ATMs are found in abundance and are always free to use.
The reality is if it sounds too good to be true, it probably is. Like the effect of any price-control measure, an ATM surcharge ban is likely to backfire on the people it was designed to help.
For example, consumers may lose access to other banks’ ATMs if the major banks decide that, since they otherwise have to give away the service, they’ll allow ATM access only to their own customers, for whom the ATM networks were created in the first place.
Providing your own customers free access to your ATMs, as all California banks do, is one thing; providing your competitors’ customers free access to your ATMs is quite another.
Simple common sense tells us that any rational private business will try to avoid having to provide its services for free.
Other ATMs may disappear altogether. Since the networks that connect ATMs with the banking system first permitted access fees in 1996, the machines have multiplied like rabbits, providing easy cash access for virtually everyone and maximizing convenience and safety for consumers. Access fees have enabled ATMs to be economically viable in remote locations. Banning the fees makes these ATMs unprofitable. If the Los Angeles measure is enacted, Angelenos may have to say goodbye to many of these ATMs.
An ATM surcharge ban in Los Angeles will also embroil the city in a costly and futile legal battle. San Francisco and Santa Monica are already tied up in court trying to defend their measures against all odds. For good reason, national banks are regulated by federal law, rather than by the political whims of local officials. And based on federal law, the national bank regulatory agency--the Comptroller of the Currency--has given national banks explicit authorization to charge non-customers a fee for using their ATMs. This means any municipal ordinance banning ATM surcharges is preempted by national law, plain and simple.
Finally, passage of this measure--in the face of opposition by all the business organizations in the city, as well as the small community banks--would tarnish Los Angeles’ reputation as a relatively business-friendly environment.
By banning ATM surcharges, San Francisco and Santa Monica now lay claim to the dubious distinction of being the only cities in the United States to impose a price-control in a private sector market other than rental housing. If ATM fees are banned without justification in Los Angeles, businesses considering moving to Los Angeles or expanding here will have to consider whether the city government might try to set prices for their products and services next.
The good news is that ATMs are already free to a bank’s own customers. A fee is only charged when someone uses another bank’s ATM. Consumers can also get cash free by taking advantage of the cash-back option at any one of the literally thousands of point-of-sale terminals located in Los Angeles. For many, if not most, purchases, people can also forgo paying cash entirely by either writing a check or using their ATM card as a debit card. What this means is that with just a little bit of self-discipline, every consumer can enact their own personal ATM surcharge ban. The choice is still our own to make. Let’s keep it that way.
