03/05/1998 01:52 PM Senate L&C

        SB 212 - FEES FOR USE OF AUTOMATED TELLER MACHINES                     
                                                                               
CHAIRMAN LEMAN announced SB 212 to be up for consideration.                    
                                                                               
SENATOR ELLIS, sponsor, explained this bill relates to automated               
teller machines in Alaska, "a multi-billion dollar industry."  This            
bill emphasizes safety and notice to the customer and the issue of             
double-charging.  There is a trend nationwide to charge ATM holders            
a second fee.  Up until a year ago the private sector itself had a             
ban on double-charging of customers for these services.  He does               
not have a problem with charging a customer for the cost of the                
convenience, but the double-charge offends him.  For someone with              
a lot of money that is not a big concern, but for lower income and             
working people, the charges get out of hand.  He thought notice to             
the consumer was getting to be more important, because the machines            
are soon going to dispense coupons, tickets, and other things that             
will divert the attention of the consumer.  Initiative for work on             
this issue came from Senator D'Amato who is working on this on a               
national level.  Other aspects of the bill are patterned after the             
state of Washington and are based on some investigative news                   
reports on ATMs being crime magnets across the country.  There are             
provisions for safety evaluations, lighting requirements, etc. that            
will make them less likely to be points of crime commission.                   
                                                                               
CHAIRMAN LEMAN asked regarding the first charge which is shared by             
banks, if there is a mechanism for the charge to be split.                     
                                                                               
SENATOR ELLIS said the only mechanism he knows of is the agreements            
between the banks and, frankly, how they charge the fees is a                  
mystery to him.  He said there are banks that don't charge fees.               
It is also a mystery about how profitable these ATMs are.  They are            
talking not just about the bank affiliated ATMs, but also the                  
independent ATMs for which there's a much greater projected growth             
in that area.                                                                  
                                                                               
TAPE 98-12, SIDE A                                                             
                                                                               
Number 001                                                                     
                                                                               
SENATOR MACKIE asked how many actual ATM transactions there are in             
this State.                                                                    
                                                                               
SENATOR ELLIS said he didn't know, but could probably get that                 
information.                                                                   
                                                                               
SENATOR MACKIE asked if the fee was a percentage or a set amount.              
                                                                               
SENATOR ELLIS answered that it is a set amount.                                
                                                                               
SENATOR KELLY asked if he was specifically exempting credit unions             
that have automatic teller machines in this legislation.  He noted             
that there is one credit union that is larger than all but one or              
two of the banks.                                                              
                                                                               
SENATOR ELLIS said he thought the definition clause was big enough             
to cover everyone; it's not his intent to exclude credit unions or             
give them any advantage over banks.                                            
                                                                               
MR. JERRY WEAVER, Secretary, Alaska Bankers Association, said he is            
also an employee of the National Bank of Alaska.  He said that                 
anyone who wants to can set up a cash machine, if they have the                
money, but he didn't think the definition was expansive enough to              
fully include those people.  The bulk of NBA's business is by                  
customers of the bank and they aren't charged for use of ATM's.                
The machines cost roughly $25,000 and about $1,500 per month to                
service.  The second fee is basically part of the service charge               
that comes from Cirrus and is 50 - 75 cents.  Plus and Cirrus both             
have regulations that require two types of notice to be given to               
customers which has to be placed physically on the outside of the              
machine and before the transaction can be completed, the fees have             
to come up on the screen.  All 120 machines the NBA has are lit and            
have video cameras with them, since video cameras require lighting             
to operate effectively.                                                        
                                                                               
MR. WEAVER said they view this as a free enterprise issue; business            
competing against business.  Consumers are very smart and quickly              
figure out what the fees are.  They look for convenience the same              
as with the hundreds of other electronic products that are                     
available to consumers.                                                        
                                                                               
Alaska is unique because in some areas these machines almost act as            
banks, especially in bush locations.  If they regulate fees and                
pass a bill such as this, they would see a fairly fast reduction of            
those machines in the availability and convenience to the                      
consumers.  There is competition out there and those people who                
have put out the heavy capital investment to get the machines out              
there should be allowed to make an adequate recovery.                          
                                                                               
MR. JAMES BEVERIDGE, AKPIRG, explained that a surcharge like this              
to a person who was not a customer of the bank would mean they                 
would be charged a fee by their own bank and the new surcharge                 
would be billed to them at the time of the transaction.  He said               
that bigger banks have a much broader network of ATM's and by                  
placing this fee on customers who aren't members of their own bank,            
they are disadvantaging small banks and credit unions.  The effect             
of these surcharges are not felt evenly by all people and                      
disadvantage people of lower incomes who need to use them more                 
frequently for smaller withdrawals.  They are often compelled to               
receive their welfare or benefit checks electronically.                        
                                                                               
MR. TERRY LUTZ, Chief Examiner, Division of Banking, said he had               
relatively few complaints, but he had a problem with the bill,                 
because it seems to target banks.  If they get rid of the first                
section identifying banks as the culprit, he thought the bill would            
be good.  He thought we needed something statewide if the federal              
government doesn't.                                                            
                                                                               
SENATOR KELLY asked if he thought the definition should be expanded            
to anyone who operates an ATM.                                                 
                                                                               
MR.LUTZ answered yes.                                                          
                                                                               
Number 242                                                                     
                                                                               
CHAIRMAN LEMAN said they would hold the bill and work on language              
to take care of the concerns and bring it up next Tuesday.