DES MOINES, Iowa - Credit unions in the Hawkeye State historically have not seen eye-to-eye with bankers. During the credit union fight for passage of The Credit Union Membership Access Act, for example, Iowa bankers used whatever resources were available to them to try to defeat the legislation. More recently, the bankers are in the process of attempting to prevent a measure-Senate File 2436-which would allow credit unions trust powers, from reaching the House floor (the bill was passed by the full state Senate in early April.) But while there are more things credit unions, federal and state-chartered banks and savings associations do not agree on, when it comes to the deployment of automated teller machines in the state there is consensus among them. In that spirit of agreement concerning the deployment of ATMs by Bank One, Utah, the Iowa Credit Union League, Iowa Bankers Association, Iowa Independent Banks and Iowa's Community Bankers have put their differences aside and cooperatively filed an amicus brief with the U.S. Supreme Court asking the highest court in the country to hear the case of Holmes Foster, in his official capacity as Superintendent of Banking and Administrator of Electronic Transfer of Funds, Iowa Division of Banking, Iowa Department of Commerce v. Bank One, Utah, National Association and consider granting the Petition for Writ of Certiorari filed by the State of Iowa on behalf of the Superintendent. Tom Griffith, president/CEO of the Iowa Credit Union League readily admits "when it's come to the legislative process, the bankers' associations and credit unions have a long history of opposing each other. It's been the standard credit union, bank relationship. "But when it comes to protecting the state's Electronic Funds Transfer Act (EFTA), "that's the one area we cooperate with each other," Griffith continued. Since financials-banks and credit unions-in Iowa are relatively small, "we-the banks and credit unions-have long believed that funds transfer machines should be operated cooperatively. That was the climate the Iowa EFTA was enacted in 1978 and it's been effective in," Griffith said. The four amici curiae put it this way in their brief: "Because of their representation of more than 95% of the banks, savings associations and credit unions in Iowa, the amici are uniquely qualified to comment on the decision of the Eighth Circuit Court of Appeals both from a legal perspective and a policy perspective." The case in question stems from a 1997 agreement Bank One entered into with Sears, Roebuck & Co., to establish and operate ATMs in at least 11 Sears stories and 13 other locations throughout Iowa. In Oct. 1997, Michael K. Guttau, then Iowa Superintendent of Banking ordered Sears to cease operation of Bank One ATMs, citing multiple violations of Iowa's EFTA. In December, he filed a "cease and desist" suit in Iowa state court against Sears (CU Times, Sept. 15, 1999). Bank One, in turn, filed suit against Guttau-Bank One v. Michael K. Guttau, in his official capacity as Superintendent of Banking and Administrator of Electronic Transfer of Funds, Iowa Division of Banking, Iowa Department of Commerce-in the U.S. Court of Appeals for the District of Columbia Circuit arguing that the state's EFTA was preempted by the federal National Bank Act and requested an injunction to block the state from enforcing Iowa Code Chapter 527 of the state's EFTA . U.S. District Court Judge Ronald Longstaff denied Bank One's request for a preliminary injunction and Bank One appealed the court's decision to the Eighth Circuit Court of Appeals on three provisions of the Iowa code: geographic restrictions; informational statement and approval by the Superintendent; advertising restrictions. In September 1999, the Eighth Circuit Court reversed Longstaff's ruling and ordered the Superintendent of Banking to allow Bank One's ATMs to operate in Iowa. In February, Iowa Attorney General Tom Miller and state Banking Superintendent Holmes Foster filed a petition for a writ of certiorari in the U.S. Supreme Court to the Eighth Circuit Court's ruling and asked the high court to uphold Iowa's EFTA that governs ATM machines in the state. The amicus brief filed by the four amici curiae is one of the latest actions taken in the on-going case (in another action in the case, 20 states and one commonwealth have filed their own amicus brief with the U.S. Supreme Court in support of Iowa. See related story, page 1.) Unlike suits in other states such as Connecticut and California concerning ATM federal v. state regulatory issues, the case in Iowa does not directly address the assessment of ATM surcharges, although Griffith quips that "surcharging is about half an inch under the surface of the case." Rather it concerns the preeminence of Iowa's EFTA in matters concerning deployment of ATMs, explained Dale A. Dooley, president/ CEO and Richard Jenkins, senior vice president and corporate counsel for Shazam, one of the largest regional electronic funds transfer networks in the Midwest and the state approved central routing center for Iowa. According to Jenkins, Chapter 527 (EFTA) of Iowa code delineates three conditions under which an out-of-state bank can deploy an ATM in Iowa: * The out-of-state bank operates a branch in the state in which the ATM is being deployed; * An Iowa financial has the right to deploy ATMs in the home state of the out-of-state bank; * all ATMs deployed by the out-of-state bank are made equally available to all ATM cardholders. Jenkins said there are no out-of-state banks that operate branches in Iowa. He explained that since Bank One's ATMs use the Cirrus and Plus EFT networks, Iowa consumers holding ATM cards from financials on the Shazam network had to have their transactions cleared through Shazam. However, since Bank One was in violation of state law, Shazam rejected consumers' transaction requests. Concerning expressed or non-expressed prohibitions against ATM surcharging in Chapter 527, Dooley said the EFTA does not "expressly prohibit the practice." However in a 1992 interpretative ruling by the state Superintendents of Credit Unions, Thrifts and Banking, they agreed that "since ATM surcharging is not expressly authorized in Chapter 527, then it must be prohibited." What happens if the U.S. Supreme Court refuses to hear the case? Griffith predicts "within about five minutes of the ruling" there will be a concerted effort by the banking associations to change the state law to allow for ATM surcharging. "Bank One doesn't give a damn whether they can advertise on the ATM terminals," he commented. "They really want to assess surcharges. We've never had a legal surcharge levied in Iowa. If all the arguments about how the public would be disadvantaged if surcharging was prohibited were true, then Iowa credit unions and banks probably wouldn't be doing as well and be as financially safe and sound as they are." Dooley said he "can't imagine anything worse for credit unions in Iowa than to have the Department of Banking lose this case." Since only a handful of credit unions in Iowa own their own ATMs, losing the case would mean most credit union members would have to pay ATM surcharges. "There is a huge shift going on in the payment system of the very large banks in this country," Dooley warned. "Credit unions for the time being will be accommodated by these banks. But there is a very real danger to the future success of credit unions as a result of credit unions finding themselves looking in from the outside to a proprietary payment system controlled by the large banks." Jenkins added that , "If the Iowa state law governing ATMs is preempted by federal law, then any attempt by the state legislature would be disallowed." If the Eighth Circuit Court's ruling is allowed to stand, the order "will have a substantial adverse effect upon Iowa consumers, competitive equality among financial institutions, and the dual banking system," the amici curiae wrote in their brief to the U.S. Supreme Court. -
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