ATM Fee Lawsuits on the Rise
Credit unions in Texas and Louisiana are facing lawsuits this month for failing to properly disclose ATM fees. New York resident Don Anderson is alleging violations of the disclosure provisions of the Electronic Funds Transfer Act (EFTA), also known as the Federal Reserve Regulation E.
When credit unions charge a fee to a consumer using a non-credit union ATM network card or debit card, Section 205.16 of the EFTA requires:
Posting a sign in a prominent and conspicuous location on or at every ATM owned or operated by the credit union stating that a fee will (or may) apply (It is not necessary to include the amount of the fee on the sign). and
Disclosing the fee on the terminal screen or paper notice before the consumer is committed to paying the fee.
Section 205.9 of the EFTA also requires the amount of the fee to appear on the receipt. A violation of Regulation E could result in a fine of up to $500,000 plus costs and attorney fees based on a class action filing.
The lawsuits typically involve missing signage on or at the ATM and/or incorrect fees disclosed on the sign at the ATM. Additionally, many of the lawsuits that have been filed involve remote ATMs serviced by third-party vendors. These lawsuits can be avoided simply by inspecting the ATMs regularly to ensure the fee sign is intact. According to CUNA, these signs are sometimes removed or defaced by customers. Credit unions may also avoid these lawsuits by not placing the precise fee amount on the sign itself, since the regulation does not require the amount of the fee to appear on the sign.
This summer, CUNA Mutual Group released alerts addressing earlier waves of similar lawsuits. CUNA and CUNA Mutual are working diligently with legislators and regulatory agencies to facilitate legislative change to Regulation E's requirement that signs be placed on or at every ATM, as they believe it is redundant since the consumer also receives the notice on the screen before completing a transaction at the ATM. For instance, CUNA has written to the Consumer Financial Protection Bureau asking it to address the situation; however, obviously there can be no guarantees of legislative or regulatory relief at this point.
Credit unions should implement the following risk mitigation strategies:
- Develop and maintain written procedures for inspecting all of the credit union's ATMs on a regular basis to ensure the ATM fee signs are intact. ATMs should be inspected at least weekly or when the ATM is serviced - whichever provides for more frequent inspections.
Consider photographing the ATM each time it is inspected for the signage, maintain a log to track all ATM inspections and have management review the log periodically to ensure accuracy. The log should contain at least the following information:
- ATM location inspected,
- Date of inspection,
- Status of ATM fee sign/notice (missing or present),
- Action taken (e.g., replaced sign, etc.), and
- Initials or name of employee performing the inspections.
- When using a third-party vendor for servicing ATMs, credit unions should require the vendor, either by contract or through a maintenance agreement, to inspect the ATMs for the fee signage.
- Missing signage should always be replaced immediately.
To ensure ATMs meet Regulation E's signage requirements, credit unions should do the following:
- Maintain a supply of signs/stickers to replace any that have been defaced or removed from ATMs;
- Periodically test the ATMs using a non-credit union issued ATM network card or debit card to confirm the fee appears on the screen and on the transaction receipt;
- Consider placing a general signage notice on the ATM stating: "A fee will [or may or specify transactions to which a fee will apply, if applicable] be imposed for providing electronic funds transfer services [or a balance inquiry];"
- Confirm ATM fees are properly disclosed on the ATM machine, on the screen, and on the transaction receipt;
- Ensure ATM fee notice signs are not damaged or removed during ATM remodeling projects and if that is not possible, place the fee notice sign in a temporary alternate location on or at the ATM in a prominent and conspicuous manner. The sign should be returned to its permanent location once remodeling is complete.
If you have any questions about these requirements or recommendations, please feel free to contact me using the information below.
CUNA Asks CFPB to Change Signage Requirements
With another round of lawsuits filed this week concerning ATM notices, CUNA President Bill Cheney has asked the Consumer Financial Protection Bureau (CFPB) to exercise its authority under the Electronic Fund Transfer Act, Regulation E, to no longer require notices on the outside of an ATM. Currently under Reg E, ATMs are required to display notices that a fee for using the ATM may or will be charged. More detailed disclosures are required on ATM screens prior to payment of the fee. It appears that outside ATM notices are in some cases being removed, destroyed or damaged and that pictures are taken of the ATM to show noncompliance. Instead of going to the credit union or the regulator about noncompliance, ATM “chasers” as Cheney called them in his communication with the CFPB, are going straight to court. The CFPB has authority to no longer require the outside notices. If the agency cannot act on this at this time, possibly because it lacks a director, CUNA urged them to support legislation to repeal the duplicative outside ATM notices. Click here to access CUNA’s letter.