WASHINGTON — Senate lawmakers are considering adding an amendment to the regulatory reform bill that could force banks and other automated teller machine operators to cap their processing fees at 50 cents.
Whether the measure comes to a vote remains unclear, but observers said if Sen. Tom Harkin, D-Iowa, succeeds in bringing his amendment up, it will almost certainly pass given its populist appeal. Senate Banking Committee Chairman Chris Dodd could also seek to add the provision to his manager's amendment without a vote.
Industry representatives say that if the measure is enacted ATMs will become less profitable, forcing banks and third-party vendors to close thousands of them.
"Banks actually often lose money or break even at best on ATM operations," said Sam Ditzion, the chief executive of Tremont Capital Group, a Boston consulting firm specializing in the ATM industry. "If this amendment becomes law, banks will shut down thousands of ATMs and nonbank operators will be completely decimated."
Harkin argues the amendment would prevent big banks from continuing to profit from exorbitant fees. The average surcharge customers pay for accessing an ATM that is not operated by their individual bank is $2.66, he said, citing recent Federal Reserve Board data.
"By charging consumers these fees, while collecting fees from other banks, these big banks are double dipping on the backs of consumers," Harkin said in a recent floor speech.
"It's unfair for people to pay that much to access their own cash."
However, industry representatives argue that Harkin's amendment would unintentionally end up passing on greater costs to consumers, since the 50-cent cap covers only a fractional cost of operating and processing an ATM, and could force thousands of nonbank operators out of business.
Of the more than 400,000 ATMs in the U.S., Tremont Capital estimates roughly 51% of them are operated by nonbanks, which rely heavily on fees to make a profit. Those companies would lose 75% to 80% of their profit, Ditzion said.
Banks, too, would end up footing more of the cost of running an ATM, which includes a processing fee as well as other expenses, such as stocking, operating and providing security.
"Banks are worried, and nonbanks are terrified, because this amendment would destroy their entire business model," Ditzion said.