April 17, 2012
Editor's note: In the months since this lawsuit was filed, Congress passed legislation that changed ATM disclosure requirements and effectively closed the loophole for so-called ATM vigilantes. Read more here: President Signs ATM, CFPB Bills.
An automated teller machine (ATM) customer who has sued 32 financial institutions over fee disclosures on ATMs has filed suit against North Coast Credit Union, alleging the credit union failed to post a notice on its ATM of the fees charged to non-members.
The plaintiff, a New York resident named Don Anderson, has already sued credit unions and banks in Arkansas, Louisiana, Nevada, New Mexico, Oklahoma and Texas over ATM fee disclosures, but this suit marks the first of its kind in the Northwest.
Anderson is one of a growing number of so-called ATM Vigilantes exploiting a loophole in the Electronic Funds Transfer Act. Credit unions and other financial institutions must disclose fees at two separate times, including once on the screen and once on the machine itself. He allegedly used the ATM at North Coast’s Mt. Vernon branch and claims the machine did not have the fee posted on the outside.
North Coast President and CEO Terry Belcoe said he got a call late last week from an attorney the credit union has worked with asking if he was aware the complaint had been filed and that they “still hadn’t gotten any notification” from the plaintiff.
"We’re in the process of gathering all the stuff we have to show our due diligence in complying with the disclosure requirement on the machine, on the screen, all of those things, going back through our logs to see if we can track down this person as actually having used the machine,” Belcoe said.
According to Belcoe, North Coast’s ATMs are checked weekly, and the inspectors even bring a stack of the fee notice stickers with them in case one has been removed.
“What we found is, people do get bored out there, apparently, and pick the stickers off,” Belcoe said.
Belcoe said North Coast’s insurance carrier told him that there are “people out cruising around in their RVs who are aware of this requirement,” simply looking for the opportunity to file suit, and that in some cases, the plaintiffs had been found to have physically removed the sticker posting the notice themselves.
“It’s so frivolous, and it’s so annoying,” Belcoe said. “Aside from squandering the amount of time that it takes to deal with it, we’re wasting members’ time and we’re wasting members’ money on trying to run back and show that we’ve covered our bases on this thing. It’s just annoying.”
This practice of “good legislation gone bad,” as Belcoe put it, has also created a cottage industry around these ATM lawsuits.
“What our attorney told us is now they’ve got attorneys that have lined up around this thing the same way they do around some of the other class-action suits where people can go to heir website, file a complaint, and then they’ll basically farm the suit out to an attorney in that area to try to litigate,” Belcoe said.
“The sharks have smelled the blood in the water, and until they do something to try to close that loophole, it’s something that people are trying to make some money off of.”
A federal judge in Harrisburg, Pa., dismissed a similar lawsuit earlier this month, saying in his ruling that the credit union in question showed undisputed evidence that an unknown third party had removed its posted notice illegally.
CUNA Mutual Group recommends ATMs be inspected on a weekly basis or when the ATM is serviced, whichever provides for more frequent inspections. Credit unions should also photograph each ATM at the time of inspection, maintain a log to track the inspections for all ATMs and have management periodically review the log to ensure proper inspections are taking place. These steps may also assist in the defense of a potential class action lawsuit.
At a minimum, the ATM inspection log should contain
- ATM location inspected
- Date of inspection
- Status of ATM fee sign/notice (missing or present)
- Action taken (e.g., replaced sign/notice)
- Initials of employee performing the inspections
Questions? Contact the Compliance Hotline: 1.800.546.4465, email@example.com.