ARCO TAKES 35-CENT DEBIT BITE BANKS SAY THEY HAD NO PART IN RAISING FEES.

Byline: Brent Hopkins Staff Writer

When they say pay at the pump, they aren't kidding - Arco customers will be paying an extra 35 cents to use their debit cards for transactions, which has motorists and consumer advocates fuming.

Arco gas stations are tacking on an additional dime to the 25-cent surcharge already paid by customers who reach for plastic instead of cash. The charge, phased in over the last month, is easily missed by shoppers who neglect to read the small print on the Payquick machines or return for a receipt.

``We had some real hesitations and reservations, but we kept seeing our costs go up, and we had to pass them along,'' Paul Langland, director of public affairs for Arco parent British Petroleum said Thursday.

Talk of rising costs was roundly dismissed by banks and industry watchdogs, who suggested that raising surcharges is unjustified and unfair.

``That's nothing but pure profit for them,'' longtime consumer advocate David Horowitz said Thursday. ``They're taking what should be a cost of business. When you use a credit card, you don't have to pay a Mickey Mouse extra charge.''

According to Langland, consideration for the fee began after an increase in 1999 when a new Payquick system replaced a similar system that debuted in the late 1980s.

Designed to allow drivers to use their debit cards at the island, Payquick quickly authorizes direct electronic transfer of funds through BP's own PayPoint communications system by calling banks and automatically withdrawing money. The system was expensive to operate, Langland said, requiring installation of new satellite communications and computer encryption of account numbers in addition to the upgrade costs.

``All these different costs were the reason for the increases, along with banks trying to charge us more,'' he said. ``It's because PayPoint has been taking so much business away from them.''

Since Arco stations don't accept credit cards, Langland said, banks cannot collect healthy processing fees from them. As a result, costs associated with debit card transactions have been raised as a way for banks to get their own slice of the pie, he said.

``Banks are getting a little bit mad at us for taking away their business,'' he said.

Leland Chan, general counsel for the California Bankers Association, denied any banker retaliation. While there are charges for handling such dealings, they are normal business fees, he said. Any surcharge comes from the retailer, not the bank.

``When you pay the 35 cents, you're only paying to Arco, not your bank,'' he said. ``Anybody who uses a debit card knows that you can use it essentially for free. There's always been interchange fees, but those have been borne by other parties besides the consumer.''

Langland said that the surcharge was evenly divided between the cost charged by ATM networks and the upkeep of the system. The Pulse network, headquartered in Houston, charges 13 cents per transaction, said executive vice president Cindy Ballard.

``At Pulse, we haven't raised our fees since 1997, and have no plans to raise them this year, either,'' she said. ``Most major retailers do not surcharge a transaction. They like it because it's fast, convenient transaction for them and they get the money right away.''

Such is the case for competing retailers. While its price of gas generally averages several cents more than Arco's bargain rates, Chevron has no surcharge.

``We treat all the cards the same,'' said Dave Heck, marketing manager for the San Francisco-based oil company. ``You can pull into a Chevron station, use a debit card and not be charged.''

The same proves true for Albertson's, whose shoppers pay no extra fees to use their debit cards.

``We like to give our customers the convenience,'' said Miguel Gutierrez, the grocery chain's public affairs manager. ``I think it's good for them to have have that. A lot of shoppers don't have the cash on them, so they would have no other way to pay.''

While most customers may ignore the charge as a small drop in the bucket, it quickly adds up.

``When you think of the hundreds of thousands of gallons of gas they pump, this adds up to quite a few pennies,'' Horowitz said. ``Everyone's trying to grab more money.''

``Everything else is being raised, so it's expected,'' said Erin Kendrew, waiting for her tank to fill Thursday at a Woodland Hills Arco. ``Stamps, phone calls, everything's going up. They get you any way they can.''