Air Date: Jan. 18, 2000
Summary:
In life there are two constants: death and taxes but now you can add a third… instant teller fees, the surcharge fees you’re hit with at those private, generic cash machines. The industry calls them white label machines and they’re everywhere you turn.
Full story:
Mathew Yuill is publications editor at Centennial College in Toronto. When CIBC pulled its automatic bank machine from the campus because it wasn’t making enough money, Yuill was a reporter for the students’ newspaper. The event was big news. The CIBC wanted $12,500 to maintain service at that campus, so the college brought in a private label banking machine.
“They were happy again,” says Yuill. But when students took a closer look at their ABM stubs and noticed a fee tacked on for the transaction, “to use student lingo, they were pissed.” They didn’t like paying money to take out their own money.
Until 1996 banks held the monopoly on cash dispensing machines. That’s when the government made it possible for private companies to provide ABM service.
For consumers the cost of opening the market to non-bank ABM’s is an additional fee on top of regular transaction fees. That fee is called a surcharge.
In the last two years, over 4,000 white label bank machines have been put on the Canadian map. They are cash dispensing only, with surcharges ranging from 95 cents to several dollars per withdrawal.
Frank Helt’s company, ABM Direct, operates about 100 machines placed everywhere from airports to convenience stores. Each one costs about $2,500 a month to operate.
“That fee helps the retailer who has put at his expense that bank machine in that location to cover his costs to provide the convenience to his customer,” says Helt.
For the convenience of making an ABM cash withdrawal from an account, virtually any time and anywhere, this is what we’d pay:
* No special service plan on bank account a withdrawal costs about 40 or 50 cents for the transaction.
* Make a withdrawal using a machine run by another bank add $1.25.
* Now make the same withdrawal at a white label machine, add another $1.25
* Total: $3.00 in fees.
At Coyote Corral, an off-track betting bar, cash is king. And you can bet there’s a white label ATM for their customers.
“They’re betting on a race, the horses are going in the gate … they can’t go down to the teller and say I want $100 to win in the fifth without cash,” notes manager Lori Oldfield. “Then that surcharge doesn’t matter to them.”
Bar owners and retailers like ABMs because they get a cut of the surcharge. As well, the machines draw customers and encourage spending.
According to Helt, “historically on transaction levels, $60 to $100 will be withdrawn by a customer … statistically about 20 per cent of that will be spent in the store … you have $18 theoretically that the customer’s now spending on milk, eggs and bread.”
The sign on some ATMs say “use at your own risk”. Would you trust such a machine with your PIN for $60? Some white label operators believe machines like these give the trade a bad name and want tougher industry standards.
What it boils down to is this: someone with a shady background, who wants to get in this business, can do it.
Mathew McIver brands and places a contact number on all of his machines. He heads up Laser Cash, a company that goes so far as to provide a refund policy and bilingual help line. He says the industry could provide checks to prevent unscrupulous operators from starting up, but “those checks are sadly lacking and this is something we’re calling for.”
McIver feels there is a natural regulator for the industry, the very organization whose rules govern all ABM transactions in Canada — Interac.
“We believe Interac really must take a more proactive approach to this industry,” he says.
Interac operates and regulates the network that connects ABMs to your bank. But it doesn’t require the white label operators to be Interac members. And consumers sometimes aren’t sure who they are dealing with because nobody is keeping a public registry of the white label operators.
One surprise in the white label business is that not all the operators are small-time “anybodies.” One of the firms getting into the act is a bank. A big bank.
Sensing a good opportunity, CIBC has spawned Ready Cash, a white label operation under a wholly-owned subsidiary company.
The ABM surcharge from a Ready Cash machine can be tough to swallow for a CIBC customer. Many customers have an unlimited-use clause in their account contract — they can use CIBC’s ABMs as much as they want without transaction fees.
Sharon Gibbs speaks for the bank and told CBC’s The National that convenience must come at a cost.
Click to view entire National segment
(requires RealVideo)
Duff Conacher doesn’t buy it. He leads the citzens advocacy group Democracy Watch.
“CIBC charge you another fee so they’re double dipping their customers,” he says.
He acknowledges that Ready Cash “technically became a subsidary and is not a bank but CIBC is violating the spirit of the bank act.”
Spirit of the bank act aside, CIBC has about 200 Ready Cash machines up and running, operated by the same subsidiary company that processes transactions for their over 4,000 regular instant tellers.
In the mean time, when you need quick cash and decide you don’t mind the cost of convenience for white label look for a clearly labelled machine with a phone number.
POSTSCRIPT
It is possible that we may see white label instant debit machines at cash registers, a move that would cost consumers even more. And the same government rule that lets white label machines surcharge also allows the banks to do it too, even at regular bank machines. It hasn’t happened, but someday you just might find an additional surcharge whenever you use any bank machine but your own.
Bankwatch 