Fleet Bank sues Connecticut for the right to charge non-customers for ATM use
By Michelle Samaad • Bankrate.com

Connecticut consumers could lose their protection from being forced to pay non-customer ATM surcharges of as much as $1.50 per transaction if one bank's lawsuit against the state succeeds.

Fleet Financial Group Inc. has been waging a battle in court against the state of Connecticut for the past year arguing for the right to charge non-customers a "foreign bank" transaction fee for using Fleet's ATMs.

If Fleet wins, banks in that state would be allowed to levy the charge, superseding any state law. A loss would mean ATM users would continue to have their pick of machines to use without incurring the non-customer fee, which can run up to $1.50. Most banks already hit their own customers with a service charge for using an ATM owned by another bank.

"Without the extra charge, we lose money on our ATMs because we can't cover costs on operating and maintaining the machines," said Jim Schepker, a bank spokesman. "Fleet customers want greater convenience, more choices and easier access. That's what we want to deliver."

State laws prohibit imposing fees
Connecticut laws prohibit any bank from imposing a fee on the customer of another bank, explained John Burke, Connecticut banking commissioner. But Fleet and the Connecticut Bankers Association argue that federally chartered banks are not restricted from imposing non-customer ATM surcharges, provided they are authorized by federal law.

Burke rebuffed the association's interpretation, noting that state law specifically authorizes a bank that has established an ATM to impose a fee on banks whose customers use its ATM, to cover a "reasonably proportionate share of all acquisition, installation and operation costs." Rather than pass that cost on to its customers, Fleet wants to hold non-customers responsible for part of the maintenance costs.

Boston-based Fleet has 1,200 branches and more than 2,400 ATMs in New England. Schepker said non-customers should expect to pay for the convenience of using another bank's machines; to avoid the fees, they should use ATMs at their own banks. Fleet has been charging the extra fee to ATM users in New Jersey, New Hampshire, Maine and New York. Non-customers in Massachusetts and Rhode Island also may have to pay the surcharge, depending on the outcome of the Connecticut suit.

Fees necessary for profits, banks say
Proponents say the extra charge collected is used to cover the ATMs' maintenance and, like any other bank fee, is necessary to generate profits in that area.

Connecticut Attorney General Richard Blumenthal said he would block any effort by Fleet Bank to charge the second fee, and the Connecticut Legislature's Bank Committee reacted to Fleet's lawsuit by calling for a bill regulating the use of ATM fees.

"People are not real happy about it," Blumenthal said. "They don't think it's fair. The reason we are in court is we don't think there is a fair or legal authority for the fee."

He added, "there are all kinds of reason for charging it but the bottom line people don't want to be charged twice. There's no justification for it."

Blumenthal said his office would appeal should Fleet win in court.

Connecticut bankers against fees -- in principle
Even though the Connecticut Bankers Association is backing Fleet in its suit, the association has always opposed surcharging, explained Gerald Noonan, president of the association. The opposition grows out of concern for the state's smaller banks, because many do not have the resources to compete with the ATM networks established by larger banks. However, the decision should be left up to individual banks, Noonan argued. "We want to make sure everyone is treated fairly, but it's certainly a pricing issue that the individual banks will have to deal with," he said.

Likewise, the association is against any quick reactions to modifying laws on ATM fees: "Any legislative action would occur after the court makes a determination," Noonan said. "There's no point in proposing a bill and the court goes in another direction."

The case could be decided on a number of factors, Noonan said, including whether the state's banking commission has the right to authorize who can impose the fee. Another factor is whether the interpretation of the law is applicable to state and/or federal banks.

Some banks adopt wait-and-see attitude
Other Connecticut banks are taking a wait-and-see attitude.

Bank Boston, with 463 branches and 1,500 ATMs in New England, plans to expand that network, said Philip Margolis, a bank spokesman.

"If the law changes, we may start charging the fee. In Massachusetts and Rhode Island, we may start charging later this year and it is likely we will add Connecticut," Margolis said. "At this point, it's a moot point."

In the midst of a merger with Eagle Bank, Webster Bank has no plans to impose the fee on non-customers, said spokesman Chris Capot. The merger, scheduled to be completed by mid-April, will expand the Waterbury-based bank's ATM network to more than 160 throughout Connecticut.

It's still too early to say at Bridgeport, Conn.-based People's Bank, said Ed Dzitko, communications officer. Non-customers can use any of its 185 ATMs at 127 branches across the state.

"It's an issue that needs to be studied but it's not something we would be opposed to," Dzitko said. "We'd have to wait to see what happens."

Fleet incurred the wrath of Senate Banking Commission Chairman Alfonse D'Amato (R-N.Y.) last year when the bank started charging non-customers in neighboring New York the extra transaction fee.

D'Amato has led the fight to implement legislation that would ban ATM charges nationwide. Indeed, consumers fed up with ATM fees have fueled much of D'Amato's push for legislative action.

78 percent of ATM customers dodge fees
Seventy-eight percent of ATM consumers actively avoid ATM with fees, according to a study released last year by the Opinion Research Corporation, an international marketing research firm. While sixty-seven percent of ATM customers say those fees discourage them from considering the fee-charging bank for other products and services.

The court is expected to rule on the case this summer.

-- Posted: March 30, 1998