Bank ATM fees need regulating

Betzi Stein wasn’t too surprised when she used her Chase ATM card at a different bank recently and was slapped with a $3 charge to withdraw some cash. Three-dollar charges for such out-of-network transactions have become the norm in the banking industry.

What did surprise Stein, 65, was when she checked her next Chase statement and saw an additional $2 charge for … well, what?

“They told me it was a fee for using someone else’s ATM,” said Stein, who lives in the Palms area of Los Angeles. “What’s that? To me, it’s like getting hit twice for the same thing.”

It is indeed. And these fees are over the top at both ends of the transaction.

ATM fees aren’t new. But what happened to Stein serves as a reminder that the banking industry still has plenty of costly — and questionable — ways of reaching into people’s pockets even as lawmakers and federal regulators crack down on overdraft charges and credit card fees.

It’s worth remembering that when automated teller machines were rolled out nationwide in the 1970s, there was no fee charged for using your card at a different bank. The banking industry was eager to encourage use of the (for them) money-saving technology.

By the late 1980s, having gotten customers accustomed to the convenience of withdrawing cash anywhere, any time, the industry realized there was money to be made from out-of-network transactions.

Within a decade, most banks were charging an average of $1 for the privilege, according to industry figures. By 2003, the average charge had risen to $2.

Now it’s $3, and some banks are already charging $4.

“They’ll take you to the cleaners if they can,” said Sally Greenberg, executive director of the National Consumers League. “They know that sometimes people can’t get to their own bank and have no choice.”

She noted that if you get hit with $5 in fees for withdrawing $20 from an ATM, that’s a 25% charge just for accessing your money.

What’s particularly galling about these fees is the fact that the transactions are entirely automated and, with millions of ATM transactions daily, represent enormous economies of scale.

As with the fees to process debit and credit card purchases, consumer advocates say it probably costs banks only a penny or two (if that) to process an out-of-network ATM withdrawal.

The rest is pure gravy.

Gary Kishner, a spokesman for Chase bank, said he couldn’t say how much exactly it costs to process an out-of-network ATM transaction.

But he defended Chase’s $2 charge — on top of the other bank’s $3 charge — as being necessary for maintaining the ATM network.

Most other big banks charge similar amounts.

Wells Fargo charges its customers a $2.50 “convenience fee” if they take their ATM cards elsewhere. Bank of America charges $2.

“It’s a network expense,” said Tara Burke, a BofA spokeswoman. “We have to track the transaction for fraud, there’s processing activity that comes into play.”

No doubt. But definitely not $5 worth — not for a transaction untouched by human hands.

Greenberg at the National Consumers League said ATM fees have largely escaped regulatory review because banks argue that consumers have a choice. “If you don’t want to pay the fee, use your own bank,” she said.

But that’s not always possible. And that’s why this should be added to financial regulators’ to-do list.

The Federal Reserve now requires banks to limit the fee they charge for debit card transactions to an amount that’s “reasonable and proportional to the cost incurred by the issuer with respect to the transaction.”

The same should apply to ATM withdrawals. A fair profit is reasonable. Fees that run many times the banks’ actual cost represent price gouging, pure and simple.

Especially when this is a service they were once able to offer for free.

AT&T raising rates

Speaking of services that were once free, AT&T is informing customers that the charge for directory assistance will rise Jan. 3 to $1.79 per call from $1.50 — a nearly 20% increase.

The telecom giant also says its monthly rate for basic residential phone service will rise for most customers to $19.95 from $16.45.

That 21% increase follows a 22% jump in the cost of basic phone service at the beginning of 2010 and a 23% rise the year before.

This is way ahead of the inflation rate, which has remained below 3% for the last couple of years.

“Our rates were held down by regulators for a long time,” said Lane Kasselman, an AT&T spokesman. “So now we’re playing catch-up. We’re staying competitive with the rest of the market.”

A spokesman for Verizon said the company has no plans to boost either its $1.25 charge for directory assistance or its $20.91 monthly charge for basic residential phone service.

David Lazarus’ column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5. Send your tips or feedback to david.lazarus@latimes.com.