N.Y. Council Chief Files Bill to Ban ATM Fees, Predicts Banks Will Sue

Article excerpt

The war over automated teller machine fees added a major new front on Wednesday as New York City Council Speaker Peter F. Vallone followed through on a promise to introduce legislation that would bar financial institutions from levying noncustomer surcharges.

Backed by 17 council co-sponsors -- half the number needed for passage by the city's 51-member council -- Mr. Vallone said banks had been given "every opportunity" to propose alternative measures since he floated the idea of a ban last fall. Instead, he said, they put up a "stone wall," resorting to threats of a lawsuit.

The bill would put New York alongside two California cities, Santa Monica and San Francisco, in seeking to eliminate surcharges that banks impose on non-accountholders who use their ATMs. Mr. Vallone said he intends for the measure to become law within several months.

Courts have blocked enforcement of the California ordinances since bankers there initiated litigation, and Mr. Vallone said he expects a lawsuit against New York should his bill be passed. A statewide ban on fees in Connecticut by the state's banking commissioner was also recently overturned.

Banks defend the noncustomer charges as a fundamental right and necessity. Though the "convenience fees" are a profitable source of revenue for many banks, they are also compensation for the costs banks incur to run and maintain the machines, they say.

Michael P. Smith, president of the New York Bankers Association, vowed Wednesday to be as "forceful as we can" in arguing against the measure. The trade group has never threatened a lawsuit, he said, and is optimistic that the door is still open for discussion with council.

"We're totally opposed to price controls," Mr. Smith said.

Consumers first saw widespread surcharging in 1996, when MasterCard and Visa's national ATM networks, Cirrus and Plus, dropped their bans on the practice.

The issue has emerged as a popular one for politicians and a convenient rallying point for consumer frustration over rising bank fees. It could draw attention because of what is expected to be a high-profile Senate race in New York State between New York City Mayor Rudolph Giuliani and First Lady Hillary Rodham Clinton. …