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From the March-20, 2002 issue of Credit Union Times Magazine • Subscribe!
Last successful state law banning ATM surcharges overturned
<p>DES MOINES, Iowa - It's official, U.S. District Court Judge Ronald Longstaff has overturned what was the last state ban on ATM surcharges. In a suit brought by Wells Fargo Bank, Firstar Bank, Metro-Bank, Bank of America and U.S. Bank the judge ruled that the Iowa law banning such ATM fees is pre-empted by the National Bank Act. The State of Iowa argued that the state regulations at issue were permissible under federal law for two reasons: first, Iowa law already allows banks to charge when non-customers use their ATMs and second, the federal Electronic Funds Transfer Act explicitly allows state regulations if they are consumer protection laws. According to the State, instead of charging the ATM users directly, the banks charge the banks of the non-customers. In the 12 months preceding the lawsuit, the five plaintiff banks received more than $3 million in such fees. Because the banks already were receiving sufficient fees to cover their ATM costs and make a profit, the State argued that Iowa law did not significantly interfere with the banks' powers under the National Bank Act. The Iowa law was intended to protect consumers by ensuring that ATMs were available to all consumers in all communities in Iowa on a non-discriminatory basis. The State argued that, if banks were allowed to assess fees directly when non-customers use their ATMs, the amount of such fees could vary from ATM to ATM, and from community to community, thereby making ATMs available on an unequal basis. Bankers maintain that the fees are justified by providing customers with more convenience. Non-customers attempting to make a withdrawal will see a written prompt reminding them there is a fee and asking if they want to continue. The ruling could result in Iowa consumers being charged up to $75 million in extra fees, said Iowa Solicitor General Dennis Johnson. While some banks like Wells Fargo and Firstar Bank seem ready to tag on "convenience fees", the Iowa Credit Union League is prepared to continue its support of Iowa Attorney General Tom Miller. "The Iowa credit union industry believes current state law, which restricts all financial institutions from ATM surcharging, best serves Iowans. We have wholly supported the Iowa attorney general in his defense of the state and encourage his appeal of this ruling," said Iowa CU League Vice President Pat Jury. "However, if federal institutions are allowed to surcharge in Iowa, we believe the same power should be provided to state-chartered institutions." According to Miller all options including a possible appeal are currently under consideration. A decision is expected within 30 days. -firstname.lastname@example.org</p>
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