Pentagon Seeks Fee-Free ATMs on Bases

The battle over ATM surcharges has opened on yet another front, and it could present the banking industry with its most formidable opponent ever: the U.S. military.

The Defense Department has entered the fray over the $1 to $3 that banks charge non-customers for using their automated teller machines, proposing a new rule that would prohibit banks operating on military bases from assessing the fees.

The rule could affect dozens of U.S. banks, ranging in size from Bank of America to community institutions, that operate on more than 400 major domestic bases and serve about 1.4 million military personnel. There are 62 military installations in California.

“Lower-paid troops can ill afford to pay these fees every time they use the machine,” said Glenn Flood, a department spokesman.

Flood said the fees are particularly hard on enlisted soldiers, who are frequently transferred to different bases and cannot change their bank accounts every time they move. In addition, most bases are served by only one bank, leaving soldiers with fewer choices, he said.

Complaints from soldiers about the fees helped spur the proposed rule, according to Flood.

The department joins a growing list of cities and states that are attempting to outlaw the fees, which consumer groups call excessive and unfair, particularly for low-income customers.

This month, the city of Santa Monica imposed a ban on ATM surcharges, prompting cities such as Los Angeles and San Diego to look at the issue. Meanwhile, residents of San Francisco will vote Nov. 2 on a ballot measure to ban the charges.

Representatives of the California Public Interest Research Group, one of the driving forces behind the San Francisco measure, said the Pentagon’s interest in banning ATM fees proves the issue has broad support.

“Banks like to argue that this is some leftist, radical issue,” said Jon Golinger, consumer program director at CalPIRG. “I don’t think you could call the U.S. military leftist or radical.”

Golinger predicted that the military’s move will serve as a model to other cities and organizations.

“When the military takes on the banks, it’s a major event,” Golinger said. “That’s what we call a fair fight.”

Bank industry groups, including the American Bankers Assn., oppose the proposed rule, saying it may lead banks to abandon military bases, shut down ATMs or limit ATMs to their customers only. “These decisions are really bad for consumers,” said Greg Wilhelm, a lobbyist for the California Bankers Assn.

Defense Department officials said they have received more than 50 letters from industry and consumer groups regarding the rule and plan to begin meeting today to work out a compromise. A final rule is expected by the end of the year.

One compromise could be an agreement by banks operating on military bases to allow one another’s customers to use their ATMs without surcharges, an industry representative said.

The military has wide latitude when it comes to regulating commercial activities on its bases. “If it’s something we want to do, we can do it,” Flood said.

But Wilhelm said a military ban on ATM fees could conflict with the position of federal banking regulators, such as the Office of the Comptroller of the Currency, which has opposed efforts by states and other localities to legislate ATM surcharges. The comptroller’s office asserts that it should have sole national regulatory authority on the issue.

Wilhelm said banks want consistent laws and regulations on ATM fees: “How can you expect a bank to run when there are different rules everywhere it operates?”