2 Banks to Limit ATM Access in Santa Monica

In a sharp counterattack against city bans on ATM surcharges, the two biggest banks in California said Wednesday that they are blocking non-customers from using their automated teller machines in Santa Monica, beginning today.

Bank of America and Wells Fargo said the 33 ATMs they have in the city were to be reprogrammed overnight to reject cards from other banks. Santa Monica’s ATM ordinance takes effect today.

BofA said it plans a similar move in San Francisco next month, when a successful Nov. 2 ballot measure banning ATM surcharges takes effect. Wells Fargo declined to comment on its plans for San Francisco, where the bank is headquartered.

The banks’ new policies--the first of their kind in the nation--heat up the controversy over ATM fees charged to non-customers and mark a step away from an industrywide trend toward making ATMs universally available.

The ordinances were promoted by consumer groups that say ATM surcharges are excessive, particularly in light of the fact that banks already share a fee, typically $2, levied by the customer’s own bank when that customer uses another bank’s ATM.

The consumer groups have been unsuccessful in getting regulations changed at the national level and so have been training their sights on state and local governments.

Banks argue that they should be as free to price their services as any other company.

Santa Monica and San Francisco made national headlines recently when they became the first cities in the nation to ban the surcharges. The surcharges in question, typically $1.50 per visit, are the ones levied by the owner of the ATM on the non-customers who use that ATM. The ordinances do not apply to independently owned ATMs, such as those often found in convenience stores and airports, and do not affect the fees that banks levy on their own customers for using another bank’s ATM.

Bank of America, Wells Fargo and the California Bankers Assn. filed suit last week in federal court in San Francisco seeking to overturn the two cities’ laws, arguing that municipalities do not have authority over national banks. Federal banking regulators at the Comptroller of the Currency are supporting their effort.

If the banks win an injunction blocking the ordinances at a court hearing scheduled for Monday, they say they will reopen the Santa Monica ATMs to non-customers.

Officials at other banks, including Washington Mutual, Union Bank of California and California Federal Bank, said they will comply with the city ordinances unless a court intervenes.

City officials in Santa Monica and San Francisco reacted angrily Wednesday. Restricting ATM access “is just the latest bullying tactic by banks and shows their utter disregard for consumers,” said Adam Radinsky, deputy city attorney in Santa Monica.

San Francisco City Atty. Louise Renne accused the banks of attempting to pressure the court into granting the injunction. “Here are these enormous institutions behaving like an 8-year-old who says, ‘If I can’t win, I’ll take my marbles and go home,’ ” Renne said.

Some consumers expressed concern about the new bank policies.

“This is going to be a problem,” said Sylvia Brower, 30, of Marina del Rey, who was using her First Federal Bank ATM card at one of BofA’s 21 Santa Monica branches on Wednesday. “When you need money, you almost have to go to BofA. They’re everywhere. Not being able to use them is ridiculous.”

Officials at Bank of America and Wells Fargo stressed that the policies will affect only non-customers attempting to use their machines in Santa Monica.

“This has no impact on our customers, who will continue to be able to use our ATM system free of charge,” said Liam McGee, Southern California president at BofA. “But we think it’s fair and reasonable that we charge a fee to someone who is the customer of another institution and wants to take advantage of our services.”

The banks say the ordinances in Santa Monica and San Francisco will cost them about $3 million a year each in ATM fees that they would otherwise have collected from non-customers.

In Connecticut and Iowa, which ban most ATM surcharges, banks have generally complied with the rules while challenging them in court. BofA and Wells Fargo do not have ATMs in Connecticut, but both institutions currently do business in Iowa without charging the surcharges.

Officials at Wells Fargo said the bank position in California is different in part because the ATM laws in California apply to cities, not a state.

“Now we are down to a micro level,” said Kathleen Shilkret, a Wells Fargo spokeswoman. “A municipal government is saying it has jurisdiction over what fees we can charge.”

The bankers’ move appears intended to discourage further spread of local bank regulation.

“They are using Santa Monica as an example,” said Jon Golinger, consumer program director at California Public Interest Research Group, the consumer organization that helped spearhead the San Francisco ballot measure. “It’s a threat directed at other cities.”

The new ATM restrictions by BofA and Wells Fargo will be reviewed by the nation’s ATM networks but the banks said they do not believe their actions have violated any network rules.

Officials at BofA, which is based in North Carolina, said that about 20% of the company’s ATM transactions in Santa Monica and San Francisco involve non-customers. Wells put the figure at 8% at its ATMs.

Wells has posted signs at its 12 ATMs in Santa Monica explaining the new policy and encouraging consumers to voice their concerns to the city.

Times staff writer Edmund Sanders can be reached at edmund.sanders@latimes.com.

Correspondent Monte Morin contributed to this report.