The US Government Accountability Office (GAO) has published a report documenting the rise of ATM fees between 2007 and 2012 in the US. The study met with an angry response from US Senators who campaign against high ATM fees, Robin Arnfield reports
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The US Government Accountability Office (GAO) carries out research in response to requests from the US Congress. Its "Automated Teller Machines, Some Consumer Fees Have Increased" report estimates the average ATM surcharge among financial institutions that charge a fee to non-customers increased from $1.75 in 2007 to $2.10 in 2012, in 2012 dollars. In 2012, surcharge fees charged by financial institutions ranged from $0.45 to $5.00.
The GAO’s analysis of a sample of 100 ATMs run by independent operators found that the average surcharge fee was $2.24 and that surcharges ranged from $1.50 to $3.00 in 2012.
The report was requested in autumn 2010 by Senator Charles Schumer, then vice chairman of Congress’ Joint Economic Committee. He was joined in his request by Tom Udall, Democratic Senator for New Mexico; Sheldon Whitehouse, Democratic Senator for Rhode Island; Bernie Sanders, Democratic Senator from Vermont; and Tom Harkin, Democratic senator for Iowa.
"We don’t make any recommendations in the report," says Alicia Puente Cackley, the GAO’s director, financial markets and community investment. "Our role is to be objective and to supply facts and data, without giving recommendations or policy statements."
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By GlobalDataThe GAO surveyed a non-generalisable sample of 30 banks and credit unions and four independent ATM operators to collect data on their ATM operations and costs in 2011. It also analysed two types of ATM fees data obtained from financial services research firms: data on fees charged by financial institutions from 2007 to 2012 that are generalisable to all US financial institutions; and non-generalisable data on fees charged by independent ATM operators which were obtained by "mystery shoppers" at 100 independent ATMs in 2012.
Response
The report received an angry response from the Senators who had requested it. "Outrageous" and "anti-consumer" ATM fees need to be reined in, said Senator Harkin.
What particularly angered the Senators is the double-charging of surcharge fees payable to the ATM operator, and foreign fees payable to the card-issuing financial institution. This is an issue Senator Schumer has campaigned on in the past.
While ATM surcharges are required to be displayed on the ATM screen before transactions take place, foreign ATMs fees aren’t required to be shown on the screen and are only disclosed in information provided by banks to their customers.
In 2012, 97% of banks charged surcharge fees compared to 92% in 2007. The estimated average surcharge fee at these banks’ ATMs rose from $1.81 to $2.16 in the same period. The percentage of banks charging foreign fees was 54% in 2012 compared with 56% in 2007. The estimated average foreign fee at these banks rose from $1.45 in 2007 to $1.52 in 2012.
In 2012, 52% of credit unions charged foreign fees and 95% charged surcharge fees, compared to 56% charging foreign fees and 81% charging surcharge fees in 2007. The estimated average foreign fee at these credit unions rose from $1.27 in 2007 to $1.29 in 2012, while the estimated average surcharge fee rose from $1.66 to $1.99 in the same period.
"This report shows that consumers can be gouged with outrageous and often hidden ATM fees," said Senator Whitehouse. "ATM operators shouldn’t be allowed to take advantage of their customers by charging these exorbitant fees."
"This report makes clear that consumers are facing ever increasing fees to access their own money," Senator Harkin said. "A consumer could pay as much as $5.00 to $10.00 dollars each time they use an ATM, and these fees could be particularly difficult to avoid in rural and underserved areas."
Explanation
The GAO’s survey of industry participants provides their explanation for the rising cost of ATM withdrawals. Most of the ATM operators surveyed by the GAO said that overall per-ATM costs had increased over the previous five years, while per-ATM revenues had declined. Many of these operators believe that ATM operation costs will continue to rise in the future and that ATM revenues will be flat or even decline.
The cost drivers most frequently cited by survey respondents are upgrading to more versatile ATMs with functions such as cheque-imaging, complying with ADA (Americans with Disabilities Act) requirements, and upgrading software. Other cost drivers include increasing fraud prevention efforts, adding ATMs to their fleets, and paying more in EFT (electronic funds transfer) network fees.
Respondents also reported decreased revenue per ATM due to declining transaction volumes. This is due in part to the greater availability of surcharge-free ATM networks and to consumers obtaining cash at point-of-sale transactions.
Surcharge-free networks
Access to surcharge-free ATM networks such as MoneyPass or Allpoint is provided by financial institutions as a service to their customers. Participating in these networks enables financial institutions to expand the number and location of available free ATMs. Three of the largest US surcharge-free networks each offer access to over 20,000 ATMs, the GAO found.
Four banks and eight credit unions in the GAO’s survey reported that they participate in at least one surcharge-free network. For example, one credit union in the survey, which owns 251 ATMs, enrolled in a surcharge-free network giving its customers free access to an additional 30,000 ATMs.
Some financial institutions offer to refund ATM fees to account-holders when they use another bank’s ATM. One community banker told the GAO that his bank gives consumers rebates on ATM fees up to $20 each month and that this approach is more cost-effective than owning and maintaining a fleet of ATMs.
Industry participants interviewed by the GAO said consumers are increasingly obtaining cash when making debit card purchases, thus avoiding ATM fees. One community banker said his bank educates customers and encourages them to obtain cash at the point of sale so that they don’t incur ATM fees. This policy allows the bank to have a smaller ATM fleet, he said.
The greatest source of free withdrawals is at the bank branch or the bank’s own ATM, the GAO notes. Around 92% of the 3.3 billion reported ATM transactions in 2011 at the financial institutions responding to the GAO survey took place at the financial institutions’ own ATMs. These transactions didn’t incur a surcharge fee.
Provision of ATMs and their charges are not uniform across the country, the survey found. Prices depend on competition in the area and also on the profitability of the ATM. This means an ATM in a low-traffic area such as an airport might charge more than an ATM in a city centre where there is a lot of traffic and a lot of competition.
