Berkeley Gives Preliminary OK to ATM Surcharge Ban

The battle over ATM surcharges is headed for a showdown in Berkeley as the city attempts to become the first in the nation to ban the fees at cash machines within city limits.

A controversial ordinance won preliminary approval at a city council meeting late Tuesday, putting the Northern California city at the center of a legal struggle between consumer groups seeking to outlaw ATM surcharges and the banking industry, which argues that cities have no authority over federally regulated financial institutions.

At issue are the ATM surcharges--usually between $1 and $3--consumers pay when they use automated teller machines not owned by their bank. A recent study from the California Public Interest Research Group found that 99% of ATMs in California impose such fees.

Consumer groups say the fees are excessive and anti-competitive. Bank officials say they are needed to pay for the installation and operation of ATMs, particularly those in locations that are less profitable for banks but more convenient for consumers, such as hotels, hospitals, grocery stores and restaurants.

Efforts to ban ATM fees have failed in about 25 states, including California. A federal proposal died last year. Only Ohio and Connecticut have succeeded in banning the surcharges, and court challenges are underway in both states.

After repeated losses against the banking industry lobby at the state and federal levels, consumer groups are moving their campaign to the local level, where they hope it will create a groundswell of support.

Other cities considering bans on the surcharges include Santa Monica and Santa Cruz.

Under Berkeley’s bylaws, the ordinance must be approved a second time before it can take effect.

The city would not be responsible for enforcing the surcharge ban. Instead, customers would be entitled to file suit against the bank and collect a $250 fine, punitive damages up to $5,000 and legal costs.

The ordinance would apply only to ATMs owned by financial institutions, not those owned by third-party businesses, including many that are in convenience stores or at gas stations.