The ATM Industry Association and vault-cash provider Cash Connect on May 13 urged ATM-industry players urging them to contact their U.S. senators in hopes of defeating an amendment to the proposed federal Consumer Financial Protection Agency that would cap ATM surcharge fees.
“The U.S. Senate is considering a measure that would cap ATM surcharge fees at 50 cents,” John Clatworthy, Cash Connect senior vice president of client services, a Newark, Del.-based company owned by WSFS Bank, writes in the letter. “The measures would be devastating to the ATM industry and would have broad negative implications for consumers and the economy.”
The letter urges ATM vendors, merchants and others to call their states’ U.S. senators and voice opposition to the amendment, which U.S. Senator Tom Harkin, D.-Iowa, is sponsoring. “Ringing telephones gets senators to take action,” Clatworthy tells PaymentsSource.
The ATM Industry Association, which represents ATM independent sales organizations, has set up an online petition, which attracted 1,800 signatures opposed to Harkin’s amendment in 48 hours, Mike Lee, the organization’s CEO, wrote in an e-mail message.
Harkin came up with the proposed ATM fee based on calculations the Office of Thrift Supervision made in 1997, according to ATM industry officials. The federal agency determined pretransaction ATM costs were 27 cents and, with inflation, that equates to about 36 cents today.
A 2006 ATM-deployer study published by the Star electronic funds transfer network determined banks and independent sales organizations pay an average of $1,450 per month to deploy an off-premise ATM, but total surcharge and interchange revenue at the average off-premise ATM is only $1,013, Clatworthy notes.
Bergen Kenny, a Harkin spokesperson, expects the Senate to vote on the amendment in the next couple of days. “It is up to the majority leader [Harry Reid] when it comes up for a vote,” Kenny tells PaymentsSource
If passed, the amendment would reduce the number off-premise ATMs by tens of thousands, Clatworthy contends. The legislation also would affect small businesses, he says.
“Thousands of small businesses, such as gas stations, convenience stores and independent ATM operators, rely on surcharge revenue to stay in business and create jobs,” Clatworthy says.
Passage of the legislation also would affect Cash Connect’s business. The company last year supplied more than $5 billion to more than 11,000 ATMs, Clatworthy says.
“It would have a market impact on our customers,” he says. “Half of our business would go away.”
Bankrate.com, a North Palm Beach, Fla.-based consumer Website, reported last fall the average ATM surcharge fee was $2.22 for banks, but 80% of the surcharge fees ranged between $2 and $3. Banks apply surcharges to noncustomers who use their ATMs.
Bankrate.com did not survey ISOs, which deploy ATMs in retail locations, including supermarkets, restaurants, bars, casinos and cruise ships, Greg McBride, Bankrate.com’s senior financial analyst, tells PaymentsSource.
The retail or off-premise ATM industry grew after April 1996, when Cirrus and Plus networks dropped opposition to surcharging; therefore, allowing ATM owners to assess surcharges. “Surcharging enabled the industry to skyrocket,” says Leon Majors, president of the payments systems practice at Phoenix Marketing International, which is based in Salisbury, Md. “Prior to surcharging, banks owned most of the off-premise ATMs. If Harkin’s amendment passes, it would be like ATM ISOs being hit in the head.”
There are more than 400,000 bank and ISO-owned ATMs in the U.S. Harkin’s amendment does consider the cost to operate the machines, including equipment depreciation, maintenance and cash costs, Clatworthy says.
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