GAO study finds real-time ATM fee disclosures would cost ATM players billions

WASHINGTON - Real-time ATM foreign fee disclosures may be too costly to justify, according to a just-released General Accounting Office study. While financial modernization legislation established parameters for disclosing surcharges consumers will pay when they use an ATM not owned by their financial, it did not deal with fee disclosures a financial may charge their own customer if that customer uses another financial's ATMs. Members of Congress asked the GAO to look into the feasibility of having ATM operators disclose such foreign fees in real-time. Well the results are in, and the cost is significant. Wiring ATM networks to disclose such foreign fees is a bit more complex than flipping a switch. "According to ATM industry representatives, real-time foreign ATM fee disclosure is technically feasible but would require extensive restructuring by all major participants in the ATM industry," stated the report. ATM players told the GAO that real-time disclosure of foreign fees would require "extensive alterations" to both hardware and software systems. The IT costs for making foreign fee disclosure possible range from $5 million for a large third-party processor to the tens of millions for large banks, found the study. The timeframe to make the changes would be around two to three years. In 1999 there were approximately 227,000 ATMs in operation in the U.S. Banks are the majority ATM players, owning about 60% of those 227,000 ATMs. The cost to update all of the machines could run up to $10 billion. "Banks, networks and ATM owners of all sizes would likely incur significant fixed costs to install, test and certify the hardware and software that would be needed to implement real-time ATM fee disclosure. However, some industry representatives suggested that the burden of real-time fee disclosure might fall more heavily on smaller firms and organizations," stated the study. The smaller the organization, the bigger the burden real-time foreign fee disclosures would have. Some representatives of ATM independent service organizations (ISOs) said that the costs could cause some ATM operators to stop operating in some locations. The GAO's position on the issue is falling in the favor of ATM companies. The GAO said that the potential consequences of foreign fee disclosures may in fact offset any consumer benefits. "If consumers are unaware of foreign fees for ATM transactions or dissatisfied with the way they are disclosed they might benefit from real-time disclosure. However, the banking regulators reported that they received very few complaints on the disclosure of ATM fees,which suggests that cardholders were not dissatisfied with the disclosure they received from their bank." The study cited some other possible solutions to heightened foreign ATM fee awareness among consumers. One was to increase the existing written disclosures with more prominent reminders in monthly statements, or by modifying the general statement on ATM screens to inform consumers that their own financial may charge an additional fee to use that machine. -pgentile@cutimes.com