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Last Updated: Monday, 21 March 2005, 23:49 GMT
UK 'risks' US-style bank charges
By Julian Knight
BBC News personal finance reporter

A purse
Charges penalise people on low incomes, campaigners say
It's often said that what happens in the US today will be copied in the UK tomorrow.

When it comes to cash machine charges, UK bank customers will be hoping this adage does not prove true once again.

The description of the US as the land of the free certainly does not apply to banking.

Stateside, four out of 10 cash machine withdrawals incur a fee.

In addition, many US bank customers have to pay for a range of services from direct debits to cheque clearing which in the UK are free.

Consumer groups such as Which? and Citizens Advice warn that the UK is sliding towards a US-style bank charging culture.

The reason for their alarm is an explosion in the number of fee-charging cash machines in the UK, from none a few years ago to more than one in three today.

Ultimately, a rise in the number of fee transactions to US levels would leave UK consumers paying 1.4bn each year to access their own money, Nationwide Building Society has calculated.

Banking bodies, however, deny that the UK is headed the way of the US. Instead, they argue that British consumers have never had it so good.

Second hand machines

Stateside, cash machine charging is endemic.

Consumers are now used to paying ATM charges, surcharging has become the norm
Tracy Shelton, New York consumer lawyer

In some parts of the US it is easy to set up in business as a fee-charging ATM provider, all you need is a few hundred dollars for a second-hand cash machine and an electronic link to the cash machine network.

As a result, fee-charging cash machines operated by independents can be found in garages and convenience stores throughout the US.

And because a system of surcharging is in place - the ATM user is charged by their bank as well as the provider of the machine they use to withdraw cash - fees in the US can be as high as $8 (4.15) per transaction.

"The first bank started surcharging in 1996 and within three years the other banks had followed," Tracy Shelton, a lawyer for the New York Public Interest Research Group, told BBC News.

"Consumers are now used to paying ATM charges, surcharging has become the norm.

"Banks have withdrawn from many poorer areas leaving the people without access to their bank's ATMs. These people, who can least afford to, now have to pay ATM surcharges."

The spread of ATM fees has proved the thin end of the wedge as far as charging is concerned, according to Ms Shelton.

"Across the board, banks are coming up with new consumer charges.

"Ten years ago it was possible to operate a cheque account for free. Now it is very tough to avoid paying bank fees."

Heading the same way?

According to anti-ATM fee campaigners on this side of the Atlantic, the UK is heading the same way.

There are now an estimated 22,000 fee-charging cash machines in the UK - close to four out of 10 of the UK's total, usually charging between 1.50 and 1.75 for making withdrawals.

And like the US, it is residents of some poorer parts of the UK, such as Speke on Merseyside, who have no access to free cash machines.

Citizens Advice says that Speke has no banks, and residents have to travel out of the area to get their cash or even to use a fee-charging machine.

Back door charging

MPs on the powerful Treasury Select committee have been investigating cash machine charging.

The big High Street UK banks have assured MPs that charging customers for cash withdrawals is not on their agenda.

However, banks have been selling off their remote cash machine sites - ATMs based in garages and supermarkets rather than in the branch - and are even buying up fee-charging ATM providers.

This has caused some to accuse the banks of nurturing a culture of fee charging.

But the banks deny this and have told MPs that the proportion of fee-charging transactions would not rise above 5%.

At present, between 3 and 4% of ATM withdrawals incur a charge.

But Nationwide has poured scorn on the 5% ceiling.

A person using a cash machine
More fee-charging ATMs than free ones by Christmas 2005, Nationwide predicts

"The banks' 5% figure is pie in the sky," Nationwide spokeswoman Rose Calendar told BBC News.

"The providers of fee-charging ATMs are not going to stop when they have 5% of the market.

"It is unlikely that we will see, in the short term, charging on the scale of the US, but more charging is inevitable."

Ms Calendar thinks Tracy Shelton is right about the ultimate risk of conditioning consumers to charges.

"The danger lies when consumers are conditioned to accept ATM fees, then who knows where charging could end," she warns.

Unique service

But the UK banking industry denies that Britain is in danger of slipping into a US style charges regime.

"Banks are not going to suddenly impose cash machine charges," said Sandra Quinn, spokeswoman for the Association for Payment Clearing Services (Apacs).

"The UK market is so competitive that the first to break cover would suffer. UK consumers enjoy free banking, as long as they are in credit, this is almost unique around the world."

As for the huge growth in fee-charging machines, Ms Quinn told BBC News that this was a boon for consumers rather than a blight.

"In most cases they have not replaced free cash machines and add to consumer choice," she said.

Nonetheless, Ms Shelton calls on UK consumers to take action to protect their free banking rights.

"Consumers need to give banks a hard time, make them miserable, to prevent what has happened over here repeating itself in the UK," she says.

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