Unmarked ATMs hold surprise fee

The Star-Ledger, April 6th, 2002

The Star-Ledger Archive COPYRIGHT © The Star-Ledger 2002

Date: 2002/04/06 Saturday Page: 001 Section: NEWS Edition: FINAL Size: 1075 words

Unmarked ATMs hold surprise fee

Banks that operate them levy surcharge on own customers


It is one of the first rules bank customers learn when they get an ATM card.

Use your own bank's machines, and you won't get slapped with a fee.

But some banks are finding creative ways to break that trusted rule - by installing unmarked ATMs, failing to reveal they own those machines and then penalizing their own account holders for using them.

In New Jersey, it's limited so far to ATMs at Trump Plaza in Atlantic City.

First Union, the second-largest bank in New Jersey, has a number of ATMs at the casino, where it has an exclusive contract.

Anybody who tries to withdraw cash from these ATMs cannot tell First Union owns them because the bank does not put its name on the machines or on the screens.

"It was at the request of the landlord," said Fran Durst, a First Union spokeswoman.

It may have been Trump's decision to keep First Union's name off the machines, but the bank made the call to charge its own customers fees for using these anonymous machines, critics said.

"It's one thing if the casino doesn't want the bank's branding in its casino, but it's something entirely different when that ATM is surcharging the bank's own customer," said Bankrate.com financial analyst Greg McBride.

The First Union Trump Plaza ATMs simply say "World Cash Center." And the actual ATM screen is no less revealing. It has a picture of Trump Plaza and flashes a "Welcome to Trump Plaza" message when you insert your card.

People who try to withdraw money from the machine get hit with a $3 surcharge, even if they are First Union account holders - a practice that contradicts written agreements the bank has with its own customers, critics said.

First Union, whose parent corporation is based in Charlotte, N.C., goes one step further, charging those same customers an additional $1 penalty for using another bank's ATM, even though the machine belongs to the bank.

"Not only are they getting a fee from customers they shouldn't be getting, but they're gouging everybody," said Phyllis Salowe-Kaye, director of New Jersey Citizen Action, the state's largest consumer advocacy group.

Tracy Shelton, an attorney with New York Public Interest Research Group, described the practice of banks deploying unmarked ATMs and then charging their customers extra fees as a "very dangerous trend."

For example, Chicago-based Bank One deploys unmarked machines known as "Rapid-Cash" ATMs that impose surcharges on Bank One as well as noncustomers. And Bank of America, another Charlotte-based bank, recently found itself in hot water after its unbranded ATMs were outed by some of its customers.

This month, Bank of America settled a class-action lawsuit and agreed to pay $700,000 in damages to account holders in Washington state after they sued the bank for operating undercover ATMs at supermarkets, and then charging customers fees to use them.

The lawsuit alleged the bank violated the Electronic Funds Transfer Act, which in part requires financial institutions to be upfront in explaining fees to customers who access their accounts through ATMs.

"We felt it was an important issue because customers didn't realize that these fees were going to their own bank," said Seattle attorney Adam Berger of Schroeter, Goldmark & Bender, who represented account holders. "There's a certain level of acceptance if you use another bank's machine that you're going to get charged. I don't think people recognize they could be charged by machines operated by their own bank."

FleetBoston Financial, the largest bank in New Jersey, said it does not operate any unbranded ATMs. The same goes for Pittsburgh-based PNC Financial Corp. And Cherry Hill-based Commerce Bancorp. said it does not operate unbranded ATMs either, although it did meet with Trump casino executives to discuss the ATM casino contract at one point, said bank spokeswoman Kathleen Brust.

Typically, bank customers are hit by two separate fees when they use another bank's ATMs: First, their own bank levies a penalty for using a competitor's machines. Then, they get slapped with another fee, called a surcharge, from the competitor for using their machines.

That is why the surcharge is often referred to as "double-dipping;" effectively, consumers are being charged twice - once by their own bank, then by the other bank - for accessing a single ATM.

When a bank operates unmarked ATMs, it gets to collect both fees from everybody.

And in a casino setting, that ATM transaction fee revenue can add up.

Typically, ATM operators and casinos share ATM transaction fee revenues, with casinos often pocketing the bulk of the money. But even if a bank pockets just 75 cents for each of the average 50,000 casino ATM transactions a day, that's close to $14 million a year.

Of the 505 ATMs First Union operates in New Jersey, the bank said the Trump Plaza ATMs are the only unbranded ones.

"These machines are unbranded at the request of the (casino), and this provision was part of the agreement," Durst said. "Any bank that won the (Trump) business would have had to agree to unbranded machines."

Durst added First Union, which will adopt the name of its Wachovia parent company in 2003, operates branded ATMs at other casinos in Atlantic City, including Bally's, Showboat and the Hilton.

Nationally, about 2.5 percent of its 4,700 ATMs are unbranded, Durst said.

First Union said it was not trying to deceive its customers at Trump Plaza.

As far as the bank was concerned, unbranded ATMs that don't carry the First Union logo or signage are not considered First Union ATMs.

"We properly disclose in our deposit agreements with our customers that any time they use a nonbranded ATM, they will be subject to a surcharge," Durst said.

Berger, the Seattle attorney, disagrees.

If an ATM is owned and operated by bank, then no matter how you slice it, the machine belongs to that bank, he said.

"That's the natural reading," he said. "There's a common understanding or assumption your bank will not charge you for using their own machines."

_____________________________________________________________________________________________ Sam Ali can be reached at sali@starledger.com or (973) 392-4188.

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