February 10, 2012

Repeal of ATM placard disclosure urged

NAFCU was among eight trade associations urging lawmakers in the House and Senate last week to remove an outmoded, lawsuit-baiting requirement under the Electronic Funds Transfer Act for placard disclosures on cash-dispensing ATMs.

The EFTA prescribes two fee disclosures at the machines: a placard disclosure, which must warn a fee may be charged, and a disclosure on the machine's video display. With the video disclosure, the user is required to affirmatively indicate whether he or she accepts the fee before going forward with a transaction.

Failure to have that placard affixed to the ATM can be costly. The groups noted that in a successful class action, plaintiffs can recover the lesser of $500,000 or 1 percent of the ATM operator's net worth, plus attorneys' fees and costs. "This bounty has created a strong incentive for spurious lawsuits" and led to situations where the notice has been removed and a lawsuit has been filed before the ATM operator is aware of any problem, they said.

These requirements, enacted in the 1990s, were necessary when off-premise ATMs were rare and consumers were unaware of the potential for fees. But today the number of off-premise ATMs exceeds 400,000, and more than half are owned and operated by non-financial institutions. Video displays have improved. "Today, consumers expect to pay a fee at an ATM unless they are using an ATM owned or operated by the bank or credit union where they have their account or their financial institution has agreed to pay for the use of the ATM," they wrote.

Without relief, they said, the rise in baseless lawsuits over missing placards "could very well reduce the number of ATMs deployed and result in reduced consumer convenience."

The letter was addressed to House Financial Services Chairman Spencer Bachus, R-Ala., and Ranking Member Barney Frank, D-Mass.; and Senate Banking chairman Tim Johnson, D-S.D., and Ranking Member Richard Shelby, R-Ala. It was copied to members of both panels.

In addition to NAFCU, the letter was signed by the American Bankers Association, American Gaming Association, ATM Industry Association, CUNA, Electronic Funds Transfer Association, Independent Community Bankers Association and National Association of Convenience Stores.