ATM Disclosure Lawsuits Mount
The issue of lawyers filing a growing number of lawsuits over ATMs missing disclosure signs has moved from being a mere nuisance to credit unions to meetings with federal lawmakers and President Obama’s administration seeking relief.
According to CUNA and other trade organizations that have faced litigation, the problem stems from a requirement in the Electronic Funds Transfer Act and associated federal regulations about the fee disclosures ATM deployers must share with consumers. According to the law, anyone deploying a public ATM must disclose the fee charged for the ATM transactions both on the ATM screen and in a sign or placard on the machine itself. ATMs that do not carry both disclosures are considered to be in violation of the law and the deployer may be vulnerable to litigation, which the law established as the main way provisions would be enforced.
“There is no way to prove it of course, unless you have a camera trained on the ATM to catch someone in the act,” Ford said. “But in some of these cases where I have seen 10 of a firm's ATMs that had the right signs on them all [of a] sudden and at about the same time not have them, well, it makes you wonder.”
Ford considers the attorneys to be the driving force behind these lawsuits. While the plaintiffs are limited to awards between $100 and $1,000, their attorneys can collect anywhere from $50,000 to $100,000 per case. Those are only on cases that actually make it to trial, he added.
The organizations said the requirement has spawned a host of spurious lawsuits from litigants.The letter also picked up on Ford’s theory of how these alleged violations occur, saying litigants have removed the posted notices and then photographed the machine without them and sued. They also argued the regulation had outlived its usefulness.
“A physical placard fee notice may have played a useful role when Congress first enacted the statutory provision in the 1990s,” the groups wrote. “At that time, off-premise ATMs were relatively uncommon, and some consumers might have been unaware that they may be charged a fee for using an ATM. Also, many ATMs were not capable of providing the notice on the monitor.”
Until an exemption is granted or the law changed, Ford said credit unions and other ATM deployers could reduce the chance of lawsuits by making sure they document the presence of the fee disclosure signs on the outside of their ATMs at least every time the ATM is serviced. They could also invest in clear coverings over the ATM signs to make them more difficult to remove, though both approaches would likely cost the deployer more money.
“It may cost an additional $1,000 or $2,000 to outfit ATMs to protect the signs,” Ford said, adding, “but that might be better than $10,000 or $20,000 to settle a suit.”