Congress: Cap ATM fees at 50 cents

By David Ellis, staff writer


NEW YORK (CNNMoney.com) -- As Congress debates the new rules of the road for the U.S. banking industry, some lawmakers have an ambitious proposal: They want to cut ATM fees.

Last week, a trio of Democratic senators led by Iowa's Tom Harkin proposed capping automated teller machine fees at just 50 cents.

chart_atm.03.gif
The number of cash-dispensing machines located across the country has nearly doubled in a matter of a decade.

Currently, banks and other ATM operators are free to charge consumers whatever they want for using their machine. And backers of the amendment maintain that those who tend feel the brunt of those fees are lower- and middle-income Americans, precisely those who can't afford it.

Indeed, ATM fees aren't cheap these days. Last year, consumers were assessed $3.54, on average, every time they used an ATM that isn't controlled by their own bank, according to Bankrate.com.

Despite this, experts suggest that the Harkin proposal is a long shot. With so many amendments vying for the attention of lawmakers to make the final draft of the financial regulatory reform bill, chances are this one will get left on the cutting room floor.

But suppose it did pass - would lower ATM fees really deliver a much-needed break for cash-strapped American consumers?

Not necessarily.

In fact, some experts suggest that capping fees might result in more harm than good for consumers.

One likely consequence would be a reduction in the number of ATMs. At the end of last year, there were roughly 425,000 cash-dispensing machines across the country, according to industry figures. About half of them were controlled by independent operators like Cardtronics (CATM) and Louisville, Ky.-based firm Payment Alliance.

Experts said these companies would be devastated by a fee cap since they earn nearly all of their revenue from charging customers that visit their machines.

Independent operators, as a result, might choose to operate only in locations that generated a lot of foot traffic, where a greater volume of transactions would offset the decline in fees. Some community lenders and credit unions might also rethink whether it's worth having so many ATMs for their customers.

Consumers, of course, might argue that a decline in the number of ATMs wouldn't necessarily be a terrible thing, given the glut of cash-dispensing machines.

But some experts fear the contraction would be far more severe than people expect.

"You could get an ATM wasteland," said Nicole Sturgill, research director in delivery channels for consulting firm TowerGroup.

How high is too high?

Still, wouldn't some consumers be willing to tolerate fewer ATMs as a side effect of lower fees? One of the reasons consumers are angry about high ATM charges is because they are paying extra simply to access their own checking or savings accounts.

Industry groups are quick to point out that the fees are necessary and help to cover a wide variety of costs involved with setting up and running an ATM.

According to industry figures, it costs between $9,000 to $50,000 to purchase an ATM. Banks and other operators then have to pay an additional $12,000 to $15,000 annually to keep the machine running.

What consumer advocates have taken issue with however, is that some banks and ATM operators charge far beyond the simple processing fee.

The Harkin amendment estimates that it only costs banks somewhere in the neighborhood of 36 cents to carry out an ATM transaction - far less than what consumers typically pay.

"Banks shouldn't be able to turn accessing your own money into a profit center," said Jean Ann Fox, director of financial services for the Consumer Federation of America.

Experts suggest that number is a little bit low, but not that far off.

What does trouble them however are some of the other unintended consequences from capping ATM fees, including stifling innovation.

Operators may no longer see the value, for example, in offering the latest technology such as allowing consumers to email receipts.

Even more worrisome is the possibility that banks could decide to impose a fee on all of their ATM users in order to compensate for the costs of running their ATMs, notes TowerGroup's Sturgill.

"When you use another bank's ATM you are helping defray the costs for everyone using that ATM," she said. "I think that is a piece that gets lost in there."

Talkback: Would you be willing to travel further to get to an ATM in exchange for lower fees? Leave your comments below or click here to e-mail the reporter of this story. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,814.94 -2.96 -0.02%
Nasdaq 4,758.25 3.36 0.07%
S&P 500 2,067.03 -2.38 -0.12%
Treasuries 2.26 -0.05 -2.16%
Data as of 6:13pm ET
Company Price Change % Change
Apple Inc 117.60 -1.02 -0.86%
Bank of America Corp... 17.10 -0.08 -0.47%
Huntington Bancshare... 10.11 -0.07 -0.69%
Kinder Morgan Inc 40.75 -0.04 -0.10%
Ford Motor Co 15.68 0.01 0.06%
Data as of 4:05pm ET

Sections

Jet fuel prices are down about 18% since August, but don't expect a break in your air fare any time soon. More

Retailers are repeating Black Friday deals from year to year, and offering the same discounts at other times. More

Sales of iPads and other tablets are slumping badly in 2014, and won't likely be a big hit during the holidays as they were last year. More

Ever since the Ebola epidemic erupted in her hometown of Foya, Liberia, Deboriah Foko has been working with Doctors Without Borders to inform others about this deadly virus. Here are journal entries from a day in her life. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.