SAN FRANCISCO - Attempts by two California cities to prevent banks from charging additional fees for use of their automated teller machines by people who don't hold accounts at the institutions has been blocked by a federal court judge. Officials for both Santa Monica and San Francisco said they would appeal the decision by U.S. District Judge Vaughn Walker to the 9th U.S. Circuit Court of Appeals. Walker ruled that the cities had no authority to regulate ATM fees and that the ordinances approved by the Santa Monica City Council and San Francisco voters in October and November 1999, respectively, would cause the banks "irreparable economic loss." He said the National Banking Act barred municipalities from regulating the ATM fees and that the city ordinances were at odds with federal regulatory policy. "The decision really upholds the right of businesses to price their products and services for a free market," said Harvey Radin, a spokesman for the banks. The ordinances by the two cities were in response to a consumer outcry against the ATM fees. They are believed to be the first in the nation to ban bank surcharges within municipal limits. City officials said the additional fees, which average $1.50 per transaction, were excessive. Bank of America and Wells Fargo Bank, along with the California Bankers Association, which represents more than 280 banks in the state, filed suit in November challenging the ordinances. BofA and Wells Fargo are two of California's largest banks and maintain the biggest ATM networks. ATM surcharges at the two banks bring in $5.5 million, according to the San Francisco Chronicle. Walker issued a temporary injunction Nov. 15 preventing the cities from enforcing the anti-surcharge measures. That injunction was upheld by the 9th Circuit. The banks had argued that "laws restricting the right of businesses to price their products and services are not in the interest of businesses or consumers and would set a disturbing precedent in a free market. "We believe that city governments are overstepping their authority by imposing pricing restrictions on federally regulated financial institutions," said Chris Chenoweth, CBA's general counsel. In his written opinion issued Monday (July 3), Walker said the cities lacked the authority to limit ATM surcharges. The ordinances only addressed the fees charged to people who used a bank's ATM and who did not have an account at the institution; it did not impose any limits on the fees banks could charge their own customers. Adam Radinsky, a deputy city attorney for Santa Monica, contended that the judge's ruling, although not unexpected, was nevertheless incorrect. "Congress, as well as the courts, have always recognized that local governments have the power to restrict and ban certain bank fees that are anti-consumer and excessive," he said. The 9th U.S. Circuit Court of Appeals said in a 1990 case that "Congress specifically has declined to restrict state regulation in the ATM context." The court further said that states, which have the same regulatory powers as cities, are authorized by federal law to provide "more stringent consumer safeguards" than the national standard for electronic funds transfers. San Francisco City Attorney Louise Renne agreed with Radinsky. "The intent of federal law is to allow consumers to protect themselves from exorbitant ATM fees," she said. The 9th Circuit Court will have the last word on the case and its intent in its 1990 ruling when it hears the cities' appeal. -
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