Santa Monica May Ban Some ATM Fees

Exercising a penchant once more for Populist economic issues, a narrow majority of the Santa Monica City Council has voted to abolish some ATM surcharges within the city.

The preliminary move has ignited paycheck passions among bank customers and owners and has raised questions about the action’s legality. On Wednesday, a state association of financial institutions characterized the proposed law as senseless and destined to die in court.

The debate centers on the $1 to $2 per transaction charged to customers who conduct ATM business at a bank where they do not hold an account. The ordinance would not prevent the customer’s own bank from imposing similar fees for using another bank’s ATM.

City Council members said the charges by banks where the customer lacks an account are unfair to consumers and small non-national banks, and have crept higher for no good reason. The council Tuesday night passed the ban by a 4-3 vote and is expected to give final approval next week.

The new rule would still allow banking surcharges imposed by ATMs that are owned by non-financial institutions--those streamlined teller machines found in convenience stores, bars and casinos.

Proponents of the ban said they hope that their efforts will be copied elsewhere and pointed with pride to a similar proposal put forth Wednesday by Los Angeles City Councilman Alex Padilla.

While many consumers say they resent having to pay an extra fee to access their own cash, bank officials say that the machines are expensive to operate and that they need to charge customers for the cost.

In downtown Santa Monica on Wednesday, ATM users were of two minds on the issue.

At a bustling Bank of America branch, Gregory Larry, 42, of West Los Angeles said he welcomed the ban.

“Banks shouldn’t be charging anything for the simple fact that they’re making money off our money,” he said. Larry was skeptical of banks’ claims that ATM’s were expensive to operate. “They have been able to downsize their companies because of these machines,” he said.

Another customer, Betty Woods, 70, of Santa Monica, offered a different view. Woods said she didn’t pay any attention to the surcharges. “I don’t care about them,” she said. “Banks have a right to run their business the way they want. The government is involved in too many things already.”

Gregory Wilhelm, a spokesman for the California Bankers Assn., said a local government should have no say over state- or federally chartered banks and how those institutions conduct business with someone who is not a regular customer.

“I don’t get it, why should somebody have to serve anybody else’s customers free of charge. It’s like saying you can’t charge for valet parking,” Wilhelm said. “It’s nuts.”

The Santa Monica measure was proposed by Councilmen Michael Feinstein and Kevin McKeown, who also have championed a city study into the possibility of creating a so-called living wage, that would mean a big pay raise for employees in Santa Monica’s beach hotel district.

Feinstein said Wednesday that the surcharge ban is intended to help small banks with relatively few ATMS compete with large national banks. To avoid paying a fee at the more numerous ATMS of national institutions, customers of the smaller banks have switched their accounts to big banks, he said.

“It’s an anti-consumer move that’s been fueled by merger mania among banks,” Feinstein said.

He said there was another, more basic consumer issue. Middle- or low-income bank customers are more likely to make more frequent withdrawals for lower amounts of money than more affluent customers who make less frequent but larger withdrawals. The less affluent therefore are penalized more, he said.

But Wilhelm said consumers have been the major beneficiaries of ATMs and are willing to pay for their convenience. “When’s the last time you’ve really had trouble getting money? Before ATMs, it was a real problem. Banks might be closed or they wouldn’t let you cash a check if you weren’t a customer. You’d have to go to the grocery,” he said.

Santa Monica Deputy City Atty. Adam Radinsky, who heads the city’s consumer protection unit, said he expects the ban to survive any court challenge. “We simply disagree with the bankers’ position,” Radinsky said.

Similar proposals are being considered in San Francisco and Berkeley, according to proponents like Jon Golinger, of the California Public Interest Research Group. He said he hoped that the Santa Monica vote would fuel those efforts.