Charges penalise people on low incomes, campaigners say

James Crosby, the chief executive of HBOS, said more fee-charging machines were being introduced because they earned more money for ATM site owners.

But Mr Crosby and RBS senior official Benny Higgins told the Treasury Select Committee they were still committed to free-to-use ATMs in bank branches.

MPs also quizzed fee-charging ATM providers over the size of the charges.

There are more than 50,000 ATMs in the UK, an estimated 19,000 of which impose charges.

The number of machines which impose charges has increased dramatically over the past five years, and Mr Crosby told MPs that the proportion of fee-charging machines could reach 50% in the future.

Consumer groups are worried that card holders are not being made properly aware that ATMs they are using charge for withdrawing cash How fee-charging ATMs have spread across the UK

Most of the growth has come from fee-charging machines being installed in locations where there was no bank-operated free-ATM, such as pubs and post offices.

Some banks, such as HBOS and Abbey, have sold their non-branch based ATMs to fee-charging providers.

Free market

HBOS recently sold off a large number of its non-branch based cash machines to a fee-charging provider, while RBS owns fee-charging provider Hanco.

Mr Crosby defended his company's decision to sell off non-branch based locations.

"These machines were very poor performing and unsustainable economically."

Benny Higgins, RBS' chief executive of retail banking, said the fact that fee-charging machines brought in more money meant the switch to fee-charging ATMs would continue.

"There will be more of it. After all, it is a free market," Mr Higgins said.

However, Mr Higgins said less than 4% of all cash withdrawals attracted a fee and that people used the machines for reasons of convenience and safety.

The growth (in fee-charging ATMs) has been purely consumer led. The vast majority of our customers repeat-use our service week in week out Mark Mills, Cardpoint

Mr Higgins added that RBS had increased the number of its free ATMs in the past year.

Recent research from Nationwide building society found that the number of fee-charging ATMs grew by 29% during the first seven months of 2004 .

At the same time, the number of free machines grew by 0.3%.

Fee-charging cash machines typically charge users between �1.25 and �1.75 a transaction.

Providers charge consumers up to �140m a year in total to use their cash machines.

Charges questioned

In sometimes heated exchanges with MPs, senior executives of four major fee-charging ATM providers - Moneybox, Cardpoint, Bank Machine and TRM - said their businesses were fulfilling a consumer need.

"The growth (in fee-charging ATMs) has been purely consumer led. The vast majority of our customers repeat-use our service week in week out," Mark Mills, chief executive of Cardpoint, told MPs.

In response to criticism from MPs over the clarity of warning messages attached to fee-charging ATMs, Mr Mills and the chief executive of Moneybox, Peter McNamara, conceded the industry should look again at the issue.

In addition, Mr McNamara said the industry could look at replacing the current flat fee for withdrawing cash with a sliding scale of charges.

At a previous meeting, consumer groups told MPs that the charges levied were "grossly disproportionate" and hit people on low incomes hardest, as these people were more likely to make smaller, more frequent withdrawals.