Consumers, Small ATM Networks Fight Against ATM Fees

Consumers and independent ATM networks say Visa and MasterCard are price-fixing.

Oct. 24, 2011 — -- Consumers are saying they are fed-up with not just Bank of America's debit card fees but other banks' ATM fees as well. Three anti-trust lawsuits are alleging Visa and MasterCard, the largest card networks, are unfairly "fixing" prices against both consumers and independent ATM providers.

In the most recent suit filed Oct. 18, one man from New Jersey, Justin Genese, is proposing a class action against the top providers of automated teller machine (ATM) services for "orchestrating, implementing, and facilitating a conspiracy to fix the prices for ATM Access fees."

An ATM user who obtains money from a machine not belonging to their bank is notified on the ATM's screen about a $2.50 fee or more surcharge.

Genese's suit is against Visa, MasterCard, Bank of America, J.P. Morgan Chase, Wells Fargo and two other financial companies, alleging that customers have "been forced to pay artificially inflated, supra-competitive ATM Access Fees" to the bank defendants and "bank co-conspirators."

All three suits, filed in the District of Columbia, say the largest ATM providers and other financial institutions are unfairly restricting market movement by preventing ATMs from charging different fees to consumers based on their type of debit card.

A similar suit filed by 14 independent ATM providers on Oct. 12 alleges that Visa and Mastercard are restricting competition by forcing them to charge all their users the same fee, regardless of their type of debit card. The plaintiffs include ATM operators not affiliated with banks, including the National ATM Council, a trade association, and ATMs of the South.

The suit alleges that Visa, MasterCard and their member banks "have misused this power to fix the access fee for any transaction at a given ATM or terminal to be no less than the amount charged at that ATM or terminal for a Visa or MasterCard transaction...without regard to any cost saving to the ATM operator of obtaining service from one of the alternative PIN-based networks."

"The ATM restraints, therefore, effectuate horizontal price fixing that is unlawful per se," the suit alleges.

"If there was a truly competitive market, the levels of the fees would be lower," Jonathan Rubin, attorney for the ATM providers said. "They're in the business of selling convenience."

About half of the 400,000 ATMs in the country are operated by providers not affiliated with banks, according to Rubin. He said his clients earn revenue by charging a surcharge to customers and a back-end switch fee.

Jim Issokson, MasterCard spokesman, said "the claims challenging certain MasterCard ATM rules are without merit."

"These rules were put in place to protect consumers from ATM operators seeking to impose discriminatory surcharges on our cardholders," he said. "We believe these important consumer protections must be preserved and we will vigorously defend against the claims brought against us."

Lisa Westermann, a Wells Fargo spokeswoman, said, "We believe the allegations of the complaint are without merit and plan to vigorously defend the case."

Spokesmen for Visa and Bank of America declined to comment. JP Morgan Chase did not respond to a request for comment.

This month, over 50,000 people have joined an online group saying they will leave banks for what they say are unfavorable practices, such as Bank of America's planed $5 debit card fee. In an event titled "Bank Transfer Day" thousands are signing up to leave large banks in favor of credit unions on or before Saturday, November 5, over what some call unethical practices.

Another suit, filed on Oct. 17 from two consumers makes similar allegations as Genese's suit, but only against Visa and MasterCard. Lynne Barton of San Francisco and Charles Brown of Washington, D.C. are listed as plaintiffs.

George Sampson, an attorney of Hagens Berman Sobol Shapiro representing the plaintiffs, said the controversy over Bank of America's $5 debit card fee and the suit filed by the ATM providers captured his clients' attention for this lawsuit.

"Our clients are generally upset about debit card fees in general," Sampson said. "There should be competition in this marketplace and we believe competition would result in lower prices and perhaps consumers having to choose networks for their transactions."

Sampson said it is possible the same judge will hear all three of these recent cases, though it is too early to tell if the cases will be combined.

"It's probably in the interest of all the parties that the cases which raise the same factual issues are heard by a single issue," he said.

Sampson and his firm previously represented Walmart and other retailers against Visa and Mastercard in a suit that led to the demise of their rule which required merchants to accept both their credit cards and debit cards. That suit settled in 2003 resulting in over $3 billion in recovery to retailers who accepted their cards from October 1992 through June 2003.

Eric Grover, principal of Intrepid Ventures, corporate development and strategy for payment networks, said the current rules keep prices from being unfairly high for Visa and MasterCard customers.

"The ATM operators are saying that it's restricting their freedom," Grover said, but Visa and MasterCard are also making choices to promote their businesses.

"The networks have an interest in ensuring the environment such that folks that have economics have an incentive to deploy ATMs," he said. "They're saying, 'You are free to license our product and participate in our network or not. And if you do, these are the terms of our business.'"