Is that unidentified ATM
secretly owned by your bank?
By Holden Lewis • Bankrate.com

When you get an ATM card, your bank makes a deal with you. They agree not to surcharge you if you use their ATMs.

But are some banks doing just that -- with unmarked ATMs?

Bank of America charged account holders for using the bank's own unbranded automated teller, in violation of its customer agreement, a lawsuit charges.

The plaintiff, Jeremy Knapp, says Bank of America violated an agreement that promises account holders free use of Bank of America-owned ATMs.

The lawsuit raises the question about a questionable practice: do banks not only fail to reveal their ownership of certain ATMs, but charge their own account holders for using those machines?

For more than a year, a couple of times a month, Knapp got cash from a generic-looking ATM inside a grocery store in Seattle. Each time, he paid two fees: $1.50 for using the ATM and a $1.75 "foreign usage" fee. The latter surcharge, also known as an "on-us" fee, is a fee that a bank charges its own account holder for using an ATM operated by another company. It appears on the monthly statement.

Sure, I'll pay ... hey, wait a minute
Knapp was willing to pay the fees for the convenience of using this particular ATM.

Then one day the machine spat out a receipt with the Bank of America logo printed on it. Knapp was intrigued because the machine had nothing on it that identified its owner. He certainly didn't think Bank of America owned it; after all, the machine was charging those fees. When he called a customer-service number on the receipt, he got hold of a Bank of America representative who confirmed that the ATM belonged to the bank.

The bank refunded $9.75 in fees for the last three times Knapp had used the machine, but he was assessed the fees again the next time. On Sept. 21 he sued Bank of America in U.S. District Court in Seattle, accusing the bank of breaching its customer agreement and violating the federal Electronic Funds Transfer Act.

"Clearly he was being charged both the foreign-use fee and the transaction fee," says Knapp's attorney, Adam Berger. "Neither of those fees should have been charged if it were a Bank of America machine."

A Bank of America spokeswoman says the bank doesn't comment on issues involving litigation. "I can tell you that Bank of America customers can avoid fees by using Bank of America-branded ATMs," spokeswoman Holly Seagle says.

Of more than 850 Bank of America-owned ATMs in Washington state, 45 are unbranded.

However, some banks do not put their names on ATMs they own, and they appear to customers as some of these generic, non-bank-owned machines.

Bank of America isn't the only institution that does this. Bank One has been a leader in the practice, says David Sorkin, assistant professor of law at the John Marshall Law School in Chicago.

"They pretend it's somebody else's ATM and treat it as another ATM and it surcharges everybody," Sorkin says.

Sorkin operates a Web site, ATM $urcharges, that outlines why he believes surcharges are deceptive, anticompetitive and unconscionable. On the site he offers advice on how to avoid surcharges and how to take political action against them.

Some Bank One ATMs charge account holders $1 and non-customers $1.50, Sorkin says. For years, banks have operated unbranded ATMs in Las Vegas casinos, levying surcharges on customers and non-customers alike. Bank of America's unbranded ATM in a Seattle store could represent the next link in the evolution to nearly universal ATM surcharging.

To fee or not to fee
Knapp's lawsuit doesn't challenge the practice of surcharging itself. It accuses Bank of America of violating the terms of its customer agreement, which, according to Berger, promises its account holders free access to their cash.

Bank of America's promotional materials make no such promises. The bank's Web site guarantees its account holders free access to cash at ATMs "which display a Bank of America sign." Does that mean the bank feels free to charge account holders for using ATMs that don't display the Bank of America sign -- even if they're owned by Bank of America?

Berger, Knapp's attorney, says: "We now have a pretty good idea that this is not an isolated practice of Bank of America -- that other banks own these unbranded or 'white' ATMs, but we don't know how the practice arose or how the banks acquired such machines in the first place."

Maybe, he speculates, banks end up owning unbranded ATMs in mergers, "so that it is possible that there might be not have been a lot of forethought here. On the other hand, it might have been the result of more deliberation and the notion that with these unbranded machines in place we can leave them unbranded and make some extra money."

How to protect yourself
How can you tell whether that generic-looking ATM is really your bank's ATM in disguise? Look for a customer-service number on the machine or printed on a receipt. If that doesn't work, call your bank and ask.

Beyond that, David Sorkin recommends that you avoid ATMs in airports, hotels, convenience stores, restaurants and casinos. Withdraw more cash at a time so you visit ATMs less frequently, and get cash back when you pay with a debit card at point-of-sale terminals (83 percent of banks don't charge for this option, according to the recent Bankrate.com Checking Account Pricing Survey.

--Posted: Oct. 6, 2000