T.J. Newton
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Corporate & Financial Reform .
The Corporate Tax: ATM Fees & Other Charges
T.J. Newton

When most people think of a "corporate tax," they think of the taxes the government charges to corporations. But there is another corporate tax. A kind of "covert tax" that ordinary people pay to corporations. This presentation will investigate this more covert corporate tax.

Actually, there are many different kinds of "corporate taxes," and many of them will be appearing in this presentation as it takes shape over the months and years. But one of the most controversial, underhanded, and unfair taxes currently outraging many people are the ATM fees charged to consumers. Understanding how ATM fees work is very complicated, especially considering that many people are unaware their own bank charges them a fee if they use an ATM that belongs to another bank. When you see the fee notice on an ATM screen, that's not your bank's fee, that's an additional fee charged by the ATM owner (at a convenience store, for example). The fee charged by your bank is "invisible" unless you read through your bank statement. When you add the two fees together, it usually costs about $4.00 to withdraw cash at an ATM that doesn't belong to your bank. These "double fees" began in 1996.

[S]ince surcharging began in 1996 [...] the cost of using [many] ATM[s] has nearly tripled (US PIRG 1).

According to industry data, ...[banks only have to pay] fees... to ATM owners [that] range from 30-75 cents, ...and switch fees paid to the network are ...around 10 cents. So the ...fees of [about] $2.00 being imposed by several of the nation's biggest banks on their own customers appear to include a hefty profit margin (US PIRG 4).

Banks argue that the marketplace should decide whether consumers want the "convenience" offered by surcharging machines (US PIRG 6).

The "market" in the U.S. has decided that with the cost of ATM's so high, it would rather move away from ATM's altogether. It may be cheaper to rely on retail outlets that offer cash back with a debit card.

While this places an unfair burden on smaller retailers, the market response shows that ATM fees are excessive. What is interesting is that there do not appear to be any $4.00 fees charged by retailers, so in many ways the entire $4.00 ATM fee is excessive.

But there is usually a charge of about 35 cents added to the bill at a retail store for this service, or sometimes, just to use your debit card to pay the retail price. That fee really does feel like a tax, since it may be added at the register on behalf of banks. What does this fee represent? It could be the network and switching fees mentioned above, but in that case, one would want to ask why fees aren't regulated (in a non-invasive, spy-free way).

The bank's argument can be misleading in more than one way. Consumers and government leaders are led to believe that there will be fewer ATM's overall, even though the market really has plenty of ATM's. In the United Kingdom, the market responded differently after the press and government intervened.

[Since 2000,] many British consumers are now able to withdraw money from most ATM's without paying any fees... at all [...] (no surcharge and no disloyalty or foreign fee) (US PIRG 9). Consumers in the United Kingdom will save an estimated £270m a year... (US PIRG 8).

The UK did not suffer an ATM shortage once fees disappeared. And the US's own neighbor, Canada, also has plenty of ATM's that do not charge consumers a fee, even though there are sometimes fees charged by the consumer's own bank for using ATM's owned by another bank. Yet, in the US, the banks are using social capitalism to put policies in place that control the market.

The bank lobby's stranglehold on state legislatures and Congress means that any action to protect consumers from double ATM fees will [not] likely occur at the [state or federal] level (US PIRG 8).

It really forces consumers to choose larger banks that have more ATM's.

Surcharging exacerbates the trend toward industry consolidation... [which] means less competition and, ultimately, higher fees for all consumers (US PIRG 2-3).

But most banks do not have enough ATM's to offer consumers the level of convenience they have come to expect. Once the banks have achieved their objectives, there will be no incentive for them to put more in place.

The marketplace the bankers talk about worked unacceptably poorly in this survey. Surveyors who attempted to find out about ATMs were given the run-around both by bank telephone and branch representatives, who said "I don't know, look at the machine," or told surveyors the wrong amount (US PIRG 6).

It is troubling to think that the market now taking shape is saying choose a big bank and drive to it, pay $4.00, or go buy something from a store and pay 35 cents (or more when banks raise that fee). We should not be paying a tax to the banks so that they can act on behalf of their shareholders to shape the market around us, particularly when it comes to charging people a fee every time they buy something. People shouldn't pay the banks a fee to spend their own money, and then have the banks work against them in the market in order to do nothing more than profit. When we pay a tax to our government, we expect our interests to be represented.

In March 2000, BankRate.com projected that ATM surcharge revenues would total $2 billion in 2000, consistent with previous PIRG and Congressional Budget Office estimates... (US PIRG 7).

That $2 billion dollars could have been used by consumers to spend on the kind of purchases that add jobs to our economy, rather than adding to the profits of banks that have cut their staffs and now charge consumers another fee to speak to a person (who may be in another country and earning an unfair wage). Instead, we have cut taxes on wealthy people in a way that does not add jobs, and then decided we like the wealthy so much we want to pay them $4.00 to withdraw our cash from their bank. Doesn't that seem like nonsense? I don't know, maybe people are afraid if they complain to the bank, the FBI will come after them for threatening the profits of those close to the administration, as stated in the USA-PATRIOT Act and Homeland Security Act.

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US PIRG: United States Public Interest Research Groups. Double ATM fees, triple trouble. (2001). Washington, DC: US PIRG. http://uspirg.org. May 20, 2004.

Selected works cited

United States Public Interest Research Groups. Double ATM fees, triple trouble. (2001). Washington, DC: US PIRG. http://uspirg.org. May 20, 2004.

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