Gas station ATMs are a banking battleground
In April, the bank closed the accounts. Their money – used to fund around $450,000 in weekly customer withdrawals – was frozen. The branch managers told them to call the bank’s risk and fraud department.
Banks are cutting off small business owners who operate independent ATMs found in US gas stations, bars and bodegas. ATM operators say it is increasingly difficult to find a bank willing to hold the funds needed to keep their machines stocked with cash. Banks that will work with them, ATM operators say, are raising their fees.
For banks, it’s a simple matter of risk. The only product from ATMs is cash, which can make them a convenient way for criminals to launder the proceeds of their illegal activities. A bank that does business with unscrupulous ATM owners could face the wrath of regulators for breaking anti-money laundering rules.
Legitimate businesses and their customers are caught in the middle. Independent ATMs serve as a lifeline for people in areas where traditional banks have retreated. According to the latest data from research and advisory firm RBR, around $90 billion was withdrawn from some 225,000 non-bank ATMs in the United States in 2020.
“Basically, our ATM is their bank,” said Ms. Ellis, who together with her husband built a network of about 100 ATMs during their 21 years in the business. The couple relied on loans from friends and family while waiting for the bank. of America to release their money.
Bank of America declined to comment.
ATM owners generally need at least two bank accounts to run their business. An account holds the money they use to store ATMs and receives deposits from the user’s bank when a withdrawal is made. The other account collects the fees an ATM user pays for the convenience of withdrawing money from the machine.
Funds flowing out of an ATM owner’s bank account to an ATM should roughly match incoming deposits. If the inflows are greater than the outflows, it could indicate that the owner is stocking the machine with extra money, possibly the proceeds of criminal activity. behviour.
ATM operators were among the businesses that were caught up in the Justice Department’s Operation Choke Point, an investigation launched in 2013 into banks’ dealings with companies seen as more likely to be involved in illegal activity . Rather than prosecute companies individually, prosecutors have targeted the financial infrastructure that keeps them going, “choking them with the air they need to survive,” a department official told The Wall Street Journal. era.
The initiative ended in 2017, but the account closures did not. Banks continued to rely on regulatory guidelines that warned that independent ATM operators posed a higher risk of fraud and money laundering.
Late last year, following years of lobbying by ATM owners that won support from lawmakers on both sides, regulators relaxed the guidelines. Language discouraging banks from working with ATM owners has been replaced with recognition of their role in providing financial services to underserved areas.
But ATM owners say the new guidelines have done little to make their lives easier. OZK Bank recently closed the deposit accounts of several board members of the National ATM Council Inc., the industry trade group, citing the risk. OZK Bank declined to comment.
Curt Selman’s story was one of them, and it wasn’t the first time. JPMorgan Chase & Co., Regions Financial Corp. and a local community bank had previously cut it.
“The window is getting smaller, and I just wonder when the music stops who will be there,” said Selman, who now has accounts with Simmons Bank and Veritex Community Bank.
JPMorgan and Regions declined to comment.
ATM owners say they tend to place their machines in areas with fewer bank branches, and many customers rely on them to access their paychecks and government benefits.
The Reverend Nathan Jordan installed an ATM in his grocery store in Hattiesburg, Mississippi, about nine months ago after responding to customer requests. The nearest bank is about 4 miles away, he said, and many people in the area don’t drive.
“It is very difficult for people to access loans and financial services,” he said. “The community I live in, people have been denied access for so long.”
Katiki Hinton has an account at a credit union about 15 miles from her home. The 47-year-old carer relies on the ATM at Reverend Jordan’s store for money to pay her electricity and water bills and to buy groceries.
“I’d rather pay the ATM fees than pay $20 for gas,” she said. “It makes a big difference.”
The relationship between ATM owners and banks is complex as the two are also competitors. When people use their debit cards at independent ATMs, the bank that issued the card pays a fee to the owner of the ATM. This interchange fee is set by the card networks. ATM owners say their fee reduction has shrunk.
In some cases, banks have pressured merchants who provide space for ATM operators.
Jay Osman, who runs a series of ATMs in Mississippi, said he had to remove a few machines after a local bank told customers it would charge them $200 a month to have an ATM in their store.
In a December 2020 letter reviewed by the Journal, Citizens Bank of Philadelphia, Mississippi cited “state and federal regulations” that consider private ATMs to be high risk and requiring increased due diligence by banks as reason for the load.
Mr Osman said he had repeatedly told bank employees that merchants were not handling money in its ATMs. He said the bank refused to change its policy. He did not respond to requests for comment.
After Bank of America closed their accounts, the Ellises began to rely more on another bank they worked with, BMO Harris. The bank told the Ellis they had to hire armored trucks to transport the money, and then it raised their fees and limited the amount of money they could withdraw. To make up the difference, they opened accounts at a Comerica Inc. branch about 100 miles away.
Their bank charges have ballooned to around $2,000 a month from around $400 before. This includes $600 rent for office space needed to accept deliveries from the armored trucks, which Comerica also needed.
BMO Harris, which reversed the fee increase after the Journal contacted the bank, declined to comment. “Personal transport of large sums of cash in and out of the banking center increases the risk to the safety of our customers and colleagues, so we are working to ensure the safest environment possible,” a Comerica spokeswoman said. .
The couple increased the fees for some of their ATMs by 50 cents to cover the extra costs. “It was a nightmare,” Mr. Ellis said. “It took 10 years off my life.”
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