By ROBIN SIDEL
Some of the nation's biggest banks are imposing a variety of new fees on people who withdraw money from automated-teller machines.
The move is the latest example of the burgeoning new fees that banks are imposing on customers accustomed to years of free services. Banks are scrambling to replace billions of dollars in revenue expected to be lost from new federal regulations on overdraft charges and debit cards.
J.P. Morgan's Chase retail division, for example, is going after noncustomers who withdraw money from the bank's ATMs, according to people familiar with the matter. Chase executives have grumbled about customers of rival banks using the company's machines even though it charges them $3, which is standard in the banking industry. Chase is now testing fees of $5 and $4 in Illinois and Texas, respectively, for noncustomer withdrawals.
More ATM fee rises are expected in the coming months. As regulations limit certain profitable practices in the industry, the banks are replacing lost funds with new fees. Some financial institutions recently introduced new charges on checking accounts as a way to make up some of the revenue that will be choked from rules imposed by the Dodd-Frank financial-overhaul law.
"The reality is that bank revenue is being squeezed by regulatory changes and the banks are going to be accounting for that in other areas," said Greg McBride, senior financial analyst at Bankrate.com.
Banks usually don't charge customers who take money out of their own ATMs. That isn't the case when people go outside the network operated by their own bank to get cash.
Using another bank's machine often subjects customers to charges from their bank as well as the institution operating the ATM. Some customers can avoid ATM fees by conducting a certain amount of business with the bank.
As a result, a fee on a single ATM transaction can reach the double digits, said Mike Moebs of Moebs $ervices Inc., a Lake Bluff., Ill.-based company that tracks such data. Mr. Moebs himself said he has been hit with fees as high as $20 for using an ATM that wasn't affiliated with his bank.
Rising ATM fees have long been a source of contention between the banking industry and consumer advocates. ATMs generated $7.1 billion in fees last year, according to consulting firm Oliver Wyman. Of that, banks collected roughly $3 billion from charging their customers for using another institution's ATM. The operator of that ATM often levies another fee on the same customer, called a surcharge. Those surcharges averaged $2.33 in 2010, up from 89 cents in 1998, according to Bankrate.com.
Last year, federal lawmakers proposed capping ATM fees at 50 cents. The proposal never came up for a vote.
There are more than 425,000 ATMs in the U.S., according to the American Bankers Association. Roughly two-thirds of them are located outside of bank branches. Most are owned by companies other than banks, such as Cardtronics (CATM) Inc.,
The banking industry justifies the higher fees on its machines, saying that the expense of maintaining and operating their ATM networks is rising. Banks spend $12,000 to $15,000 a year to maintain each ATM, according to the ABA.
Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, said the big banks are using "scare tactics" by raising ATM fees at the same time they are fighting the new debit-card fee restrictions. He noted that small banks and credit unions don't appear to be raising ATM fees so far.
J.P Morgan Chase, which controls nearly one dollar out of every $10 in deposits, operates roughly 16,000 ATMs. Illinois and Texas, where the bank is testing higher fees for noncustomers, represent two of the bank's biggest retail markets with about 3,600 ATM machines combined.
"If you have to find revenue somewhere, increasing this surcharge [on noncustomers] is the least unpleasant way of doing it," said Tony Hayes, a partner in the banking practice of Oliver Wyman.
More bank consumers also will be facing charges from their own institutions. TD Bank last week dropped its policy of letting its customers use other ATMs for free. The bank is now charging the industry standard of $2 to most of its customers.
"The change in the ATM fee structure was necessary, in part, given the current regulatory and competitive banking environment," said Rebecca Acevedo, a spokeswoman for the bank. TD's research shows that most of its customers use only the bank's ATMs, meaning they wouldn't incur any fees, she said.
PNC recently announced that it will later this year give up its five-year-old program of reimbursing some customers for charges incurred when using a non-PNC ATM. The move came as PNC also vowed to maintain its most basic checking account free of fees.