ATM fee cap: Unintended consequences

We understand why U.S. Sen. Tom Harkin, D-Iowa, would target something as unpopular as ATM fees. All of us have cringed when we see how much cash we sometimes have to pay just to get cash.

But we're glad his proposal to cap fees at 50 cents did not make it into a massive regulatory overhaul of the financial system that passed the Senate this week.

In offering his proposed cap, Harkin argued that consumers are being forced to pay high ATM fees that don't reflect the true cost of transactions. His rhetorical targets were big banks that he contends are fleecing the little guy and gal.

Harkin's plan drew lots of press. It even prompted some to wonder if senators are out of touch with our everyday lives.

Sen. Ben Nelson, D-Neb., expressed puzzlement about the issue to the Omaha World-Herald, admitting that he had never used an ATM. It turns out he wasn't the only one with limited knowledge of electronic banking technology common to most of us.

But in the end, with a critical regulatory bill on the line, Harkin backed away, rather than force debate and delay. That's probably a good thing, because we think his proposal could have had unintended consequences.

Half of the nation's 400,000-plus ATMs are not owned by banks but by private operators. Some are small businesses with employees and overhead costs that must be covered through transaction fees.

It is those operators, and not much-maligned big banks, that would have been harmed most by Harkin's idea. It's likely a 50-cent cap would have prompted some of those businesses to shut down or remove thousands of no-longer-profitable ATMs. Meanwhile, big banks might have been able to absorb the loss.

That would have been bad news for consumers, who enjoy having cash on demand almost everywhere.

Sure, some of those convenient machines charge eyebrow-raising fees.

But consumers do have choices to weigh against convenience. No one is required to use a high-fee machine. Usually, there is no fee for withdrawing money from an ATM owned by the bank where you do business. Some banks offer fee-reimbursement account plans. Many retail stores allow fee-free cash back with purchases by debit cards. We have options.

Congress must focus on prudent, big-picture financial regulations as we try to rein in excesses that helped spark a global financial meltdown. Bickering about ATM fees, no matter how much we might dislike them, would detract from that critical debate.

It's unlikely Harkin will give up for good. That's not his style. But for now, we're glad that he and the Senate decided to deposit the ATM fee cap in the unfinished business pile.