Money: Humdinger at the hole in the wall over charges

As MPs probe ATMs that levy fees, Sam Dunn looks at possible reforms and the future of `free cash'

here were accusations of secrecy and obfuscation, a dollop of farce and a wave of moral outrage. The parliamentary inquiry into cash machine charges turned into a rumbustious affair last week as the Treasury Select Committee grilled bank chiefs and bosses of fee-charging ATM operators over the network's future.

A snapshot of an ATM carrying a "fee-warning" sticker at knee-height was brandished by James Plaskitt, Labour MP for Warwick and Leamington, to highlight the lack of clarity.

It emerged that three of the operators charging for the use of their ATMs - Moneybox, Cardpoint and Bank Machine - had secretly voted against greater transparency of charges for consumers at a meeting of Link, the body behind the machines' electronic network.

In particular, John McFall, Labour MP for Dumbarton and committee chairman, attacked the small size of the on-screen fee warnings and the reluctance of Ashley Dean, managing director of another charging operator, TRM, to consider introducing large warning stickers at its sites.

And Angela Eagle, Labour MP for Wallasey, expressed the anxieties of consumer groups that people living in deprived areas - often "deserts" for free ATMs - would suffer the most.

The inquiry is scrutinising the rise in charging machines and the possible threat to the network's future. In 2000, nearly every UK cash machine was free, but since the market was opened up to independent operators, charging machines have expanded rapidly.

Up-to-date figures suggest that four in every 10 ATMs, around 20,000, now levy a typical fee of pounds 1.50 to pounds 2. And half of all cashpoints are soon likely to be charging, James Crosby, chief executive of HBOS, told the committee.

That said, the vast majority of us still use a free hole in the wall: the latest figures suggest just 3 to 4 per cent of all transactions are made at a charging ATM. According to Peter McNamara, chairman of Moneybox, there will be growth here but it will "top out" at around 5 per cent due to the big banks' commitment to free networks.

To this end, reported Ron Delnevo, managing director of Bank Machine, operators would be searching for "greenfield sites" rather than those taken over from banks.

Mr Crosby and Benny Higgins, retail banking chief at Royal Bank of Scotland (RBS), run banks with free ATMs but were asked to appear because of their groups' involvement in the fee-charging industry. RBS recently bought Hanco, a charging ATM firm, while last year HBOS sold off 816 of its formerly free sites in remote areas to Cardpoint. The inquiry also heard how HBOS had lent money to Cardpoint to help it buy the old machines.

However, both banks said they were committed to keeping their estates free of charging ATMs - and increasing the number of fee-free machines.

Mr Crosby stressed that HBOS had kept 100 free ATMs in remote and "uneconomical" areas, often because they were the last in a particular town.

Ms Eagle raised the prospect of a cap on charges to protect poorer people in areas without a free ATM. Mr Crosby did not object to the idea but suggested it would be difficult legally to introduce such a measure.

Nigel Beard, Labour MP for Bexleyheath and Crayford, asked if it would be possible to introduce a "sliding scale" of fees at ATMs, but was told technological limitations and commercial viability could prevent this.

The heads of the charging ATMs launched a vigorous, and sometimes heated, defence of their industry at the inquiry.

"People are not just happy to use us the first time but the 50th time, too," said Mark Mills, chief executive of Cardpoint. "The growth is consumer- led: customers have come to our services and the vast majority repeatedly use our services."

Mr Delnevo pointed out that charging operators made cashpoints available in areas that would otherwise have no machines: "The banks pulled out [of these locations] 10 years ago. Now we provide a service."

From July, Link members will have to incorporate more visible signs at their ATMs.

The inquiry continues on Thursday, with Stuart Bernau, executive director at the Nationwide building society, next up for questioning by the MPs. The mutual has largely led the campaign against charging machines and has proposed a voluntary code of practice.

Mr Bernau will be followed by Graham Halliday, banking and financial services director of the Post Office, and Stephen Timms, financial secretary to the Treasury.