Banks make a tidy profit off ATM fees, as at the Bank of America cash machine in this photo, which can range anywhere from $1 to $7, but a proposed amendment to the financial reform bill would put an end to that by capping fees at 50 cents per transactionBanks probably make a tidy profit off ATM fees -- which can range anywhere from $1 to $7 -- but a proposed amendment to the financial reform bill would put an end to that by capping fees at 50 cents per transaction.

The amendment, introduced by Senator Tom Harkin (D-Iowa) and co-sponsored by Senators Schumer and Sanders, aims to "ensure that fees charged to consumers at ATMs bear a reasonable relation to the cost of processing the transaction."

Harkin says that based on the "best available data," the cost per transaction is 36 cents, therefore 50 cents per transaction is a reasonable upper limit.

Level the Playing Field for 'Average Joe'

"Under the current structure, banks charge consumers fees for using ATMs while also collecting fees from other banks. This amendment restricts the double-dipping that benefits banks and costs consumers," said Harkin in a prepared statement. "Our mission in financial reform is to level the playing field for the average Joe. My amendment goes to the heart of that mission, ensuring consumers are no longer victimized by unfair fees."

Bank of America (BAC), Citigroup (C) and JPMorgan Chase (JPM) all declined to comment.

Banks are easy targets for politicians in the current political climate -- consumer animosity and rage toward financial institutions is palpable -- still, it's not clear the amendment would serve everyone's best interest.

ATM Companies Will Go Out of Business

"It's outrageous," says Jeremy Inman, executive vice president of operations for Aptus Financial, a Portland, Ore.-based company that sells, places and services white-label ATMs. "Capping surcharges at 50 cents would mean that the industry would see a lot of [ATM] companies go out of business. They survive on, and their financial model and revenue share, is very, very dependent on ATM surcharges."

The result, Inman says, is that "Subsequently you'd see a lot of cardholders who no longer have quick access to cash. And you'd likely see companies like MasterCard and Visa take pretty significant hits. Any time somebody uses their cards, Visa or MasterCard gets paid."

Inman also argues that the amendment would hurt retailers who often not only take a percentage of the ATM fees, but who may expect a certain percentage of purchases to be paid for with cash. If customers could no longer take cash out at the retail location, some retailers would probably see a sharp increase in credit card transactions and credit card fees."

Unintended Consequences: Access to Cash May Be Limited

Another potential consequence of the amendment: Banks may close less-profitable ATMs, thus limiting consumer access to cash.

"Banks build ATM networks for a couple different reasons -- to provide their customers with access to their cash in a convenient way, and to generate revenue from non-customers who are willing to pay for the convenience of using ATMs in certain locations," says John McGuinness, an attorney with Kelley Drye & Warren in Washington, D.C. "There are extensive costs in building the network, ranging from system support to security cameras, and if the fees are capped, then I think it's foreseeable that banks would start closing certain ATMs or maybe ban non-bank customers from using those ATMs."

This isn't the first time politicians have tried to limit or ban ATM surcharges. In 1999, the city of Santa Monica, Calif., passed a measure that banned ATM surcharges. It was subsequently sued by a slew of banks, including Wells Fargo (WFC) and Bank of America, arguing that states didn't have the right to regulate nationally chartered banks. The measure was eventually overturned.

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