STATEMENT OF MICHELLE MEIER COUNSEL FOR GOVERNMENT AFFAIRS WASHINGTON OFFICE CONSUMERS UNION OF U.S., INC. on S. Consumers Union* greatly appreciates the opportunity to bring to the committee's attention the consumer's perspective 2898 and the future development of automated teller machines (ATMs) in the United States. While we support the general direction of the bill, we strongly believe it should go further to authorize the unrestricted development of ATMs by national banks. INTRODUCTION In In recent years, the growth of (ATMs) has skyrocketed. 1970, there were approximately 18 installed ATMs throughout the United States. One observer estimates that at the end of 1983 approximately 38,000 ATMs had been installed and that 54,000 ATMs would be installed by the close of 1984.** Further, many financial institutions have established or joined statewide, regional and/or national networks, through which they are able to offer their customers access to their *Consumers Union is a nonprofit membership organization chartered in 1936 under the laws of the State of New York to provide information, education, and counsel about consumer goods and services and the management of the family income. Consumers Union's income is derived solely from the sale of Consumer Reports, its other publications, and films. Expenses of occasional public service efforts may be met, in part, by nonrestrictive, noncommercial grants and fees. In addition to reports on Consumers Union's own product testing, Consumer Reports, with approximately 3 million circulation, regularly carries articles on health, product safety, marketplace economics, and legislative, judicial, and regulatory actions which affect consumer welfare. Consumers Union's publications carry no advertising and receive no commercial support. **H.S. Nilson, ATMs Worldwide: The Nilson Report Annual Summary of Automated Teller Machines and Debit Cards at A-8 (3d ed. 1984). own proprietary ATMs or to the shared ATMs of other institutions. At the present time there are 7 national and approximately 200 regional ATM networks. For the consumer, Many ATMs operate on a CONSUMER CONVENIENCE these figures reflect added convenience. 24 hour basis, allowing consumers to perform routine banking transactions on their own time schedules. A s a result of the growth of ATM networks, consumers are provided both time and geographic flexibility. To access their accounts, they are no longer limited to their own financial institutions' brick and mortar facilities. Rather, in addition to those offices, they may access their accounts at shopping centers, supermarkets and other locations if the need for "quick cash" arises. ENHANCED COMPETITION The added service provided by ATMs located both on and off the premises of a financial institution offers not only a convenience in itself but a quantum leap forward in the degree of competitiveness in the banking industry. Because of the development of both proprietary and shared ATM networks, a financial institution will not necessarily enjoy the assurance of a captive customer base merely because its brick and mortar facilities are located, for example, in the center of a lively business district. In a freely developed ATM market those who work in the business district may choose from among several alternative institutions that own or share one or more networks of conveniently located ATMs. To attract the deposits of those who live or work in the area, all of these institutions, not just the few with brick and mortar offices, will compete with one another in a more vigorously competitive local market. In other words, the 10 to 3 o'clock banking hours have traditionally forced consumers to choose a financial institution with offices located within a short distance from home or work. Without this overiding limitation, consumers are free to compare institutions on the basis of a full range of product and service offerings. COST SAVINGS Finally, consumers may also benefit from the unimpeded development of ATM networks because the cost savings they are expected to provide member financial institutions will potentially be passed on to them. After finally winning the right to earn market interest rates on their savings, consumers of basic banking services are now being hit with extraordinary service fees, penalty charges, and minimum eligibility requirements. As financial institutions realize the anticipated cost savings of replacing human tellers with computers, those cost savings should be passed on to consumers. Hopefully, competitive market forces will produce this result. APPLICABLE LAWS AND REGULATIONS The present state of development of ATM networks has occurred in spite of, rather than because of, a confusing body establish branches within a particular state only to the extent branching is permissible under state law. In an apparent attempt to conform its regulations with a 1976 court decision2/ interpreting section 7, in 1982 the Office of the Comptroller formally issued a regulation that only identifies as branches those ATMs that are either owned rented by a financial institution. Under the regulation, 3/ a or bank in State A can not Own or rent an ATM in State B unless the branching laws of State B specifically allow banks of State A to establish branches there. A bank in State A may not even own or rent an ATM within the same state if the state has unitary branching laws or other branching restrictions, such as home office protection laws. In an apparent attempt to stretch judicial interpretation to the limits of propriety, the Comptroller's regulation implicitly excludes a class of ATMs from the definition of a branch within the meaning of the McFadden Act. This exempted 1/ 12 U.S.C. Section 36. 2/ nom., 3/ IBAA v. Smith, 534 F.2d 921 (D.C. Cir.), cert. denied sub 12 C.F.R. Section 5.31 (1984). class includes those ATMs not owned or rented by a national bank but used, frequently on a transactional fee basis, by the national bank's customers. No explicit provision in the federal regulation, however, explicitly authorizes national banks to use these shared ATMs without regard to state restrictions. Although the Comptroller's regulation implicitly permits these sharing arrangements and operates under a general policy of allowing unrestricted proprietary ATM "branching" in those states where branching is allowed, many states have enacted laws that specifically restrict the location and permissible functions of ATMs. According to one authority,/ approximately thirty eight states have EFT statutes. Approximately 13 states regulate the permissible in-state geographic areas in which an ATM may be established. For example, several states have enacted county-wide ATM placement limitations. Aside from these restrictions on in-state geographic ATM placements, a patchwork of state laws limits the ability of financial institutions to permit their customers to access their accounts through ATMs located out-of-state. Further, a majority of states prohibit out-of-state banks from placing 41 Conference of State Bank Supervisors, A Profile of State Chartered Banks (10th ed. Jan. 1984). All of the information in the text regarding state laws affecting ATMs is taken from this source. |