By Kevin Bogardus - 06/19/12 09:00 AM EDT
The banking industry is lobbying aggressively against a regulation that requires ATM operators to post placards that list the fees for using the machines.
Business groups argue the fees are already disclosed on the ATM screen during a transaction and say the placard requirement spawns frivolous, costly lawsuits that cost thousands of dollars to fight. A bill that would void the rule is moving swiftly through the House, despite warnings from consumer groups that customers might lose important information.
Lobbyists for the Credit Union National Association (CUNA) are telling lawmakers that credit unions could be forced to spend up to $2,000 per machine for notices that serve no purpose.
“If a credit union is spending — as in this case — $2,000 to comply with a regulatory requirement that doesn’t benefit the consumer, that comes as a cost to them. We can’t use that $2,000 to make a loan to them,” said Ryan Donovan, CUNA’s senior vice president of legislative affairs. “That’s money we can’t use for our members.”
Consumer groups are lobbying to keep the regulation in place, saying customers need to know ATM fees before they begin a transaction on the machine.
“It’s one sure way to make sure that consumers understand the fees that are involved with the transaction,” said Pamela Banks, senior policy counsel for Consumers Union. “You should have the notice upfront before you even start the transaction.”
Banking lobbyists say lawsuits centering on the ATM placards have spiked in recent years.
James Ballentine, chief lobbyist for the American Bankers Association, estimated that there have been 500 lawsuits filed since 2002 against ATM operators after their placards were removed or defaced.
“It’s almost a cottage industry now,” Ballentine said.
“We have member credit unions subject to folks who go around, remove ATM placards and then file suit against our members,” said Brad Thaler, vice president of legislative affairs for the National Association of Federal Credit Unions (NAFCU). “Short of basically stationing a person there at all times, there’s no way to make sure that an institution can make sure the placard is there at all times.”
Several lobbyists also noted that ATM fees are disclosed on the machines’ screens during transactions and said the placards have outlived their usefulness since first being required roughly 20 years ago.
The difference over how ATM fees are disclosed has pitted consumer groups against banking associations.
This month, Consumers Union, Consumer Action and U.S. PIRG sent a letter to lawmakers in the House and Senate opposing legislation that would end the placard regulation. They argue the ATM notice informs consumers that they can be charged a fee not only by the ATM operator but also by their bank.
“The ATM fee sign is the only warning that a consumer may receive about the possibility of a fee being charged by the consumer’s bank and the owner of the ATM. Without this posted sign, a consumer may engage in the transaction before knowing the fee,” the groups said in the letter.
That followed a letter business groups sent in February to both the chairmen and ranking members on the House Financial Services and Senate Banking committees opposing the rule.
“During the last 18 months, both the number and cost of these lawsuits have risen precipitously. If unchecked, these lawsuits will threaten the economic viability of ATM operators and may result in reduced consumer convenience,” said the letter, which was signed by the American Bankers Association, CUNA, NAFCU and the National Association of Convenience Stores, among others.
Federal regulators are also in the mix. The CFPB has mentioned the regulation as part of its effort to streamline rules governing the banking industry.
“Should the requirement to post a sign be eliminated? Are other disclosures of ATM fees adequate to inform consumers?” the CFPB asked in a Federal Register notice last December.
Consumer advocates said they would be willing to work with the agency on the regulation, and in the meantime, lawmakers should avoid the issue.
“We would be agreeable to working with the CFPB on finding a way to make for reasonable compliance,” Banks said. “We think the CFPB is the appropriate place to do this. … Let the regulator do its job.”
Financial-services lobbyists, however, said Capitol Hill needs to take the lead on modifying the regulation.
“Based on our early conversations with the CFPB, it seemed to us that they weren’t inclined to make a change on this,” Donovan said. “Also, you get this done much more clearly if you have a statutory remedy.”
A CFPB spokeswoman said the agency is still evaluating comments it received on the ATM fee disclosure provision and does not comment on pending legislation.
The bill repealing the placard rule seems poised to make progress in the House. The legislation has 98 co-sponsors, according to congressional records, and will be marked up on June 27 by the House Financial Services Committee.
Similar legislation has also been introduced in the Senate by Mike Johanns (R-Neb.). That bill now has 13 co-sponsors, according to a Johanns spokesman.
“It has broad, bipartisan support and Sen. Johanns is working to move the bill forward, both through committee and the Senate,” the spokesman said.
Banking lobbyists said they are hopeful that the legislation is on its way to becoming law.
“This is past its due date, and we hope Congress moves to correct it,” Ballentine said.