I. FEDERAL LAW
Sections 701-705 of the Gramm-Leach-Bliley “Financial Modernization” Act are designated as the “ATM Fee Reform Act of 1999,” which was effective immediately with the passage of the bill on November 12, 1999. Sections 702 and 703 require:
The ATM operator must meet the notice requirements when the operator charges for a balance inquiry, whether or not the consumer also makes a funds transfer as part of the transaction. The law prohibits the ATM operator from charging any fee for host ATM transfer services when a notice is required, unless the consumer receives proper notice and after receiving notice chooses to complete the transaction. For purposes of the law, “host transfer services” means “any electronic fund transfer made by an automated teller machine operator in connection with a transaction initiated by a consumer at an automated teller machine operated by such operator.”
The disclosure requirement applies to “operators of ATMs whether bank-owned or non-bank-owned ATMs” if a fee for “host transfer services” (e.g., access fees or network interchange fees) will be imposed on card users who are non-customers of the ATM operator. In the event that an ATM carries no access fees for non-customers, the notice under § 702 is not required.
Disclosure requirements at each ATM location require that the operator of the ATM post a notice “in a prominent and conspicuous location,” on or at each ATM, if the ATM operator imposes a fee to any consumer for providing “host transfer services” to such consumer. Such notice must disclose:
NOTE: The required notice may indicate that a fee may be imposed for providing electronic funds transfer services or for a balance inquiry, but this notice may only be substituted for the notice described immediately above, if there are circumstances under which a fee will not be imposed for such services.
The preceding notice must be given either directly “on the screen” or “on a paper notice issued from the machine,” at a time after the transaction is initiated and before the consumer is irrevocably committed to the transaction. In essence, if an individual inserts another bank’s ATM card into an ATM machine, the ATM must either display a message on the screen or provide a paper notice identifying the fact that a fee will be charged, the amount of such fee and offering the individual the right to rescind the transaction before becoming irrevocably committed.
If an ATM that charges a fee currently has the technical ability either to post the notice on-screen or to print a paper notice, the ATM must immediately use either the on-screen or printed paper notices. The ATM operator is not liable under the act if there is non-compliance with the posting requirement because another person removes, damages, or alters the notice.
A second ATM-related disclosure must be given to each customer at the time of contracting for electronic funds transfer services (e.g., when applying for an ATM or debit card). The second required disclosure must be given by all banks that authorize electronic funds transfer services, not just those banks that have decided to charge access fees to non-customers. The disclosure requirement, contained within § 703 of the Act, amends the Electronic Funds Transfer Act by requiring that a bank disclose, when a customer contracts for an EFT service, that a fee may be imposed by (a) an automated teller machine operator . . . if the consumer initiates a transfer from an automated teller machine that is not operated by the person issuing the card . . .; and (b) by any national, regional, or local network that is used to carry out the transaction.
II. FEDERAL REGULATIONS
Amendments to Regulation E implement the law for which compliance became mandatory on October 1, 2001.
A. Initial Disclosure Requirement
A provision added to the initial account opening disclosure requirements requires a statement that a fee may be imposed by an ATM operator or a network used to complete the transaction when the consumer initiates electronic fund transfers or balance inquiries at an ATM operated by another entity. If networks are not imposing fees on consumers, any reference to a network fee may be omitted. The following sample disclosure language is found in Appendix A-2 of Regulation E:
When you use an ATM not owned by us, you may be charged a fee by the ATM operator [or any network used] (and you may be charged a fee for a balance inquiry even if you do not complete a fund transfer).
NOTE: Phrases bracketed or within parenthesis may be omitted if not applicable.
B. ATM Disclosures
Any ATM operator that imposes a fee on non-customers for initiating an electronic fund transfer or a balance inquiry must inform customers that a fee will be imposed and the amount of the fee must be disclosed either on the ATM screen or on a paper notice prior to the consumer becoming irrevocably committed to completing the transaction. No fee may be imposed until such notice is properly given and after the consumer elects to complete the transaction. Sample notice language is also found in Appendix A-2 of Regulation E. The required notice may indicate that a fee may be imposed for providing services, but this notice may only be utilized if there are circumstances under which a fee will not be imposed for such services.
C. Required ATM “On-Machine” Fee Notice (Repealed by Congress – December 2012)
1. Introduction
Class action lawsuits have been filed in various parts of the country against financial institutions and other ATM operators for failure to display the required on-machine notice on their ATMs. The Electronic Fund Transfer Act (EFTA) and its implementing Regulation E require ATM operators that might impose a fee on a consumer for initiating an electronic fund transfer or balance inquiry to provide notice that a fee will be imposed for that service.
To satisfy the notice requirement, an ATM operator must have both (1) an “on-machine” notice that a fee will or may be imposed for providing electronic fund transfer services or for a balance inquiry; and (2) a notice on the ATM screen or on paper before the consumer is committed to paying the fee. Most ATM operators properly display the on-screen/paper notice, but the failure also to display the on-machine notice has resulted in class action lawsuits being filed against ATM operators.
Regulation E permits an ATM operator to impose a fee on a consumer for initiating an electronic fund transfer or balance inquiry only if the consumer is provided both the on-machine and on-screen/paper notices. Unfortunately, the fact that the consumer agreed to the fee on-screen does not, by itself, remove the liability exposure for the ATM operator.
2. Steps To Avoid Liability
ATM operators should periodically check their ATMs to ensure they display the required notice. Since the ATM notice can be vandalized or removed, ATM operators should routinely inspect their ATMs (for example, whenever the ATM is serviced) and document that each ATM contains the required notice. Keeping a supply of on-machine notices on hand to replace missing or vandalized notices is recommended.
The EFTA specifically recognizes a number of defenses that can be raised by an ATM operator who is the subject of an ATM fee notice class action lawsuit. ATM operators are not liable under the EFTA if:
3. Potential Damages
Many of these lawsuits have been filed for the nuisance value and the hope of a prompt settlement; however, the EFTA caps class action damages at the lesser of $500,000 or one percent of the net worth of the defendant (plus attorney fees and costs).
III. NEBRASKA LAW
A. ATM Access Fee Disclosures
Effective February 15, 2013, Nebraska has essentially codified the ATM disclosure provisions of federal law.
Neb.Rev.Stat. § 8-157.01(4) provides: Any consumer initiating an electronic funds transfer at an automatic teller machine for which an automatic teller machine surcharge will be imposed shall receive notice in accordance with the provisions of 15 U.S.C. 1693b(d)(3)(A) and (B), as such section existed on January 1, 2013. Such notice shall appear on the screen of the automatic teller machine or appear on a paper notice issued from such machine after the transaction is initiated and before the consumer is irrevocably committed to completing the transaction.
The term “surcharge,” as used in the above-cited sections of law, is defined in Neb.Rev.Stat. § 8-101(8) as follows:
Automatic teller machine surcharge means a fee that an operator of an automatic teller machine imposes upon a consumer for an electronic funds transfer, if such operator is no the financial institution that holds an account of such consumer from which the electronic funds transfer is to be made[.]
B. Access Charges for Customers of Foreign Financial Institutions
The provisions of Neb.Rev.Stat. § 8-157.01(19) authorize banks to impose access charges against customers of foreign financial institutions and provides that no agreement regarding the operation or sharing of an ATM may prohibit the right of the owner or operator of the ATM to impose such fees.