alifornia Gov. Arnold Schwarzenegger recently signed into law a bill that allows ATM firms to charge cardholders fees on ATM transactions made with internationally issued cards.

Previously in California, ATM firms could only add surcharges to transactions that cardholders made using cards issued in the United States. SB 389, sponsored by Sen. Bill Morrow (R-CA), passed almost unanimously through both branches of California's legislature.

The new law will increase revenues in all facets of the industry. It "will not only benefit mom-and-pop shops and U.S. consumers whose bank fees make up for the lack of lost surcharges [on international accounts] but also the ATM industry," said Ron Christensen, Chief Executive Officer of ATM management firm SWIPE USA.

Christensen expects SWIPE alone to see a 5% - 7% increase in revenue over the first 12 months after the law takes effect on Jan. 1, 2006. He said SWIPE was very active in the passage of the bill by attending legislative hearings and lobbying for the bill.

Michael Brown, CEO of Innovus Inc., a New Orleans-based ATM provider and processor, first brought the surcharging issue to Sen. Morrow's attention. "Simple equals is what it comes to," Sen. Morrow said. "This will allow EFT [networks] to charge whatever is appropriate."

California is the 14th state to enact this law. Why are international cardholders often exempt from ATM fees? Sen. Morrow explained that there is no specific reason for the exemption.

ATM networks have contractual agreements with their clients, the ATM deployers. The agreements stipulate in part that charging fees on international ATM transactions is subject to state law.

The two international ATM networks, MasterCard's Cirrus and Visa's PLUS, once compensated ATM owners for the full fee when international customers used the ATMs. Brown said that until the last two or three years, networks paid ATM owners between $2.25 and $2.75 on each international ATM transaction. Most recently, he said, they've paid well under a dollar.