You are an aide for the Senate Banking Committee Chairman. He comes to you with

Question

You are an aide for the Senate Banking Committee Chairman. He comes to you with a bill that

proposes setting limits on what ATM owners can charge nonaccount holders, over and above

what banks charge their own customers. Currently, large banks charge noncustomers an

average fee of $1.35 per transaction in addition to the fees the customer’s own bank imposes.

The Senator asks you to look at a proposal that would place a $0.50 cap on the fees ATM owners

can charge noncustomer for accessing their money. If this legislation is enacted, what would be

the likely effects?

Explanation / Answer

Since ATM fees of withdrawl will fall, there will lower incentive to open new ATM machine for inter banking withdrawl. The supply of ATM machines would fall. Customers would be left with limited options of ATM. With this fall in withdrawl fees, there will rise in withdrawl. With increasing time, this huge demand may force government to increase cap further so that price of withdrawl is justified.

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