April 19, 2012
Just as North Coast Credit Union became the latest target of an opportunistic class-action lawsuit regarding ATM fee notices, legislation introduced in the U.S. House of Representatives Tuesday could ease current ATM fee disclosure regulations and help put an end to similar frivolous lawsuits without compromising consumer protection.
Regulation E currently requires financial institutions to display a notice on the exterior of their ATM if a fee will be charged. More detailed ATM fee information must also be provided before the transaction is completed, either by showing it on the ATM's screen or providing the ATM user with a printed disclosure before he or she has committed to paying the fee.
A class-action suit was filed last week against North Coast by Don Anderson, a New York resident who has already sued several credit unions and banks in other states over similar cases. He is one of a growing number of consumers abusing the regulation’s intent, using it to file lawsuits in the hopes of settling for a small profit. Anderson 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 called these suits “the legal loophole du jour that credit unions are having to deal with right now.”
“We have insurance for this kind of stuff, and we’ve been doing what we need to do to comply with it,” Belcoe said. “When you get that many pages of regulation to comply with, unfortunately, it’s not just us that’s aware of it. People that want to work the system are aware of it too, and if the game is wired to give them incentive to take advantage of it, someone eventually will.”
H.R. 4367, introduced by Reps. Blaine Luetkemeyer (R-Mo.) and David Scott (D-Ga.)., would take some of that onus off of the credit unions and financial institutions currently forced to defend themselves in these cases. If the measure passes, ATMs would only be required to display the ATM disclosures on a screen and would need to give ATM users the choice to opt in or out of any fees. The stipulation mandating that a fee disclosure notice be physically attached to the machine would be eliminated.
“You assume it’s going to be fine,” Belcoe said of the lawsuit. “You assume it’s going to be okay, because you assume that common sense will prevail and they’ll be able to recognize that we are aware what we have to do, we have been doing it, and that that’s good enough. You certainly hope so. The frustrating part of it is just that you’ve got to go through all this, you’ve got to go through all this time and effort on something is certainly not, when they came up with these regulations, what they had in mind.”
Pennsylvania State Employees Credit Union in Harrisburg, Pa., recently won a dismissal in a similar lawsuit. In that case, the credit union provided the judge with evidence of its original posting of the notice, its ongoing inspections of the ATM (with photographs), and an account of its employees’ actions in replacing the notice when it had been removed. The judge cited section 1693 of the U.S. Code, which says that if the required ATM notice has been posted by the operator in compliance with the law and the notice is subsequently removed, damaged or altered by any person other than the operator of the machine, the operator has no liability.
“This victory shows that credit unions can fight back, that regular inspections and documentation of their inspections and actions may have a positive effect on the outcome of these lawsuits,” said Mary Sroufe, director of compliance services for the Northwest Credit Union Association (NWCUA). “Credit unions are already complying with this regulation. They just need to be able to prove it.”
In an Anthem article last year, the NWCUA recommended regular ATM inspections and created an ATM log for credit unions to use in their ATM audits, and those remain credit unions’ best defense against EFTA ATM fee disclosure lawsuits. The log can be found on the Resources page of InfoSight.
“Nobody dies from this stuff. This is just the stuff you’ve got to work with,” Belcoe said. “With any luck at all, we’ll be able to diffuse it and not have it become more of a pain than it already is.”
Questions about keeping your credit union in compliance? Contact the Compliance Hotline: 1.800.546.4465, firstname.lastname@example.org.
Questions about the NWCUA’s efforts in easing credit unions’ regulatory burden? Contact Director of Regulatory Advocacy Jaycee Winn: 503.350.2209, email@example.com.