Our Ref. 3058/03
13 December 2004
Mr. Martin Groves
Clerk to the Joint Committee
Joint Committee on Finance
& the Public Service
Leinster House
Dublin 2
Dear Mr. Groves,
I refer to your letter of 3rd November 2004 in which you advised that the Chairman of
the Joint Committee has requested a briefing note from the Financial Services Regulator (‘FSR’) in respect of charges imposed for ATM transactions.
Bank Charges and the Consumer Credit Act 1995, as amended (‘the Act’)
Section 149 of the Act places a statutory obligation upon credit institutions to formally notify the FSR of every proposal to increase an existing charge for a service to customers and every proposal to introduce a new charge for a service to customers. Section 2 defines a credit institution to be:
“ (a) the holder of a licence granted under Section 9 of the Central Bank Act,
1971,
(b) a body licensed to carry banking under regulations made under the
European Communities Act, 1972,
(c) a building society incorporated or deemed to be incorporated under section
10 of the Building Societies Act, 1989,
(d) a society licensed to carry on the business of a trustees savings bank under
section 10 of the Trustees Savings Bank Act, 1989,
(e) such persons or class of persons as may be prescribed by the Bank for the
purposes of this Act”
In responding to the Committee’s request, I have assumed that the request relates primarily to charges imposed for ordinary ATM transactions (i.e. withdrawing cash from ATMs) and does not relate to the charges imposed for the use of ATMs abroad (which may include a foreign exchange charge).
Charges imposed by Credit Institutions
In line with Section 149 of the Act, as discussed above, credit institutions are required
to have notified the FSR of the maximum charge that they impose for ATM transactions. These charges generally range between 20c to 30c per transaction. The charge is levied by the card issuing credit institution and is debited directly from the customer’s account. The charge is not dependant on whether the cardholder uses the issuer’s own ATM machines or any other ATM machine that the cardholder can access (the practice of imposing disloyalty charges where a cardholder uses other than their own institution’s ATM machines does not occur in Ireland). Accordingly customers of a given card issuing credit institution pay the same charge irrespective of which ATM machine they use.
Independent ATM Operators
A number of independent ATM installers have sought in the past to enter the market on the basis of installing their own ATM machines in convenient locations such as shops, petrol stations, cinemas etc., and also in more remote parts of the country. These operators would not come within the definition of credit institution as set out in the Act. These independent installers indicated that they wished to impose charges anywhere between €1.00 and €2.50 on those ATM cardholders who would use their machines. However, they also took the view that, as they were not credit institutions under the Act, they did not have any obligation to either notify the additional charges they wish to impose or comply with any direction issued. A number of these independent installers apparently obtained legal advice supporting their position. Our understanding is that independent installers would not be in a position to operate their ATM machines without the involvement of a sponsoring credit institution (i.e. for the purposes of processing / authorising ATM transactions from cardholders’ accounts) and therefore our policy is that additional charges imposed for the use of such machines would require notification by the sponsoring credit institution under the relevant provisions of the Act. This reflects the previous policy stance of the Director of Consumer Affairs, which was based on legal advice available to her at that time.
Interchange Fees
You may be aware that when a cardholder uses an ATM operated by an entity other than that of the card issuing (sponsoring) credit institution, an interchange fee is levied on that institution. The level of interchange fee differs on the basis of the number of ATMs operated by the credit institution in question and is set by way of bilateral arrangement. These fees are not within the scope of Section 149. We understand that these fees can, on occasion, significantly exceed the actual transaction charge levied on its customer by the card issuing credit institution.
Conclusion
Since its establishment the FSR has had no approaches from any independent installers on the issue nor has it received any related notifications from credit institutions proposing to impose charges for ATM transactions beyond those charges already notified (i.e. in the range of 20c to 30c as already stated above). The FSR would be glad to investigate information that the Committee may have of any instances to the contrary.
Yours sincerely,
________________
Mary O’Dea
Consumer Director