isa U.S.A. and MasterCard International lifted their longstanding bans on collecting convenience fees at ATMs in April of 1996, after more than a dozen states passed laws allowing the practice.

The result: a proliferation of ATMs at locations other than bank branches, many of them deployed by independent operators rather than banks.

Could lightning strike twice, albeit generating a far less dramatic storm?

Visa and MasterCard operating rules do not allow ATM operators to collect surcharges from international cardholders at ATMs in the United States, except in states where it is expressly allowed by law.

According to a Visa spokesperson, the rule's intent is to avoid confusing international cardholders, who "rarely, if ever, encounter surcharges on ATM withdrawals."

Collecting user fees from such cardholders "negatively impacts the PLUS brand on a global basis," according to a recent Visa member bulletin.

Visa "has no plans to revisit" the rule, according to the spokesperson.

Yet 12 states, Alabama, Arkansas, Georgia, Idaho, Louisiana, Maine, Mississippi, Montana, Nevada, Tennessee, Texas and Wyoming, have passed laws allowing acquirers to collect fees from international cardholders. Two others, California and Washington, are considering similar legislation.

In Washington

In Washington, House Bill 1138 passed unanimously in February and was referred to the Senate, where it was heard by the Financial Institutions, Housing and Consumer Protection Committee last week.

Sen. Darlene Fairley, the committee's chair, will determine whether to bring the bill to a vote by the end of this month, according to a representative of her office.

"This is a small business bill, from my perspective," said Rep. Doug Ericksen, one of the bill's two sponsors.

Ericksen represents a border district. He said many of his constituents, business owners with ATMs on their premises, lose fee income when the machines are used by Canadians and other international cardholders.

A similar bill passed the House but died in the Senate last year. Ericksen believes it would have made it out of committee and ultimately passed if its Senate champion hadn't had to undergo an emergency appendectomy during a week of key hearings.

Rep. Janea Holmquist, the bill's co-sponsor, noted that international cardholders see the same screen that offers ATM users the option of whether to accept a fee and proceed with a transaction or decline the fee and cancel the transaction.

"We want to make it legal to impose a fee on people who, by their own actions, have already accepted it," she said.

Ghandi Vuich, owner of Fast Cash ATM, an independent operator with 120 ATMs under contract in Washington, Oregon and California, estimates that about 25% of the transactions on his machines, many of which are placements, are made by international cardholders.

At one site, a truck stop in Ferndale, Wash., near the Canadian border, a whopping 70% of transactions fit this category.

Vuich said the loss of surcharges "really hurts" at those terminals.

If the legislation does not pass this session, Vuich said he intends to "call every ATM owner in Washington state and let them know we need to make a big push and get (the law) on the books."

Vuich said he had little luck enlisting the help of the Washington Bankers Association. "They don't miss what they don't see. My business is 100% ATMs, so I know exactly how much money I'm losing. I don't think banks are as aware of it."

In California

In California, the Senate Judiciary Committee will hear Senate Bill 389 on April 12. Damon Conklin, Legislative Director for the office of Sen. Bill Morrow, the bill's sponsor, said the Senator represents a southern district where a large number of cardholders from Mexico and other countries use ATMs without paying a convenience fee.

The practice of collecting fees only from American cardholders is "discriminatory," Conklin said.

J. Michael Brown, Chief Executive Officer of independent ATM operator Innovus, which has some 3,000 ATMs under contract across the country, will attend the Senate hearings in California.

Brown, an old hand who lobbied to bring surcharging to his home state of Louisiana in 1992, is also working with legislators in Florida and New York. He'd like to see a federal law addressing the issue.

Some 1,800 of Innovus' ATMs are placements, many of them at locations like casinos and hotels, which attract large numbers of international patrons.

"We have ATMs where, during some months, we might collect a surcharge on just 200 of 1,000 transactions," Brown said.

Collecting fees from international cardholders was not an issue when the amount of interchange earned adequately compensated acquirers for such transactions, Brown said.

However, both Visa's PLUS and MasterCard's Cirrus have lowered the amount of interchange for international transactions in recent years.

According to the Visa spokesperson, Visa reduced its international ATM disbursement fee to $1 for transactions acquired in the United States, effective October 2003, "as a result of a global ATM cost study and a global effort to improve data quality from ATMs."

The interchange earned for transactions conducted by Canadian cardholders is the same as for United States cardholders, currently $0.50 for withdrawals at non-branch ATMs. When new Visa rules go into effect later this year, that amount will drop to $0.40 for some deployers.

"When you look at the costs of equipment, cash, maintenance and rent, that [$1] doesn't come close to covering it," Brown said. "People are getting their lunches eaten over this."

Original article: www.atmmarketplace.com/news_story_22569.htm