Judge Nixes Ban on ATM Fees

S A N  F R A N C I S C O, July 4 -- A federal judge has struck down thenation’s first local ATM fee bans, those approved last fall by SanFrancisco voters and Santa Monica’s City Council.

U.S. District Judge Vaughn Walker ruled Friday that only thefederal government could impose such restrictions.

San Francisco officials had argued that the Electronic FundsTransfer Act governing ATM use allowed the city to enact consumerprotection measures, including the right to regulate fees.

But Walker ruled that two federal laws — the National BankingAct governing nationally chartered banks and the Home Owners LoanAct governing federal savings banks — took precedence.

Angry Banks

The ordinances were challenged in San Francisco federal court byWells Fargo and Bank of America, which control 86 percent of theATMs in the two cities. Another bank, California Federal, laterjoined the suit.

In November, San Francisco voters approved a referendum by a 2-1margin that outlawed fees charged by banks to people who withdrawmoney from ATMs at banks at which they do not maintain accounts. Asimilar ban was passed weeks earlier by the City Council in SantaMonica, outside Los Angeles.

Nearly all banks impose extra charges on other banks’ customerswho use their automated teller machines. The fees are as much as$2.50 a transaction and come on top of any fees banks charge theirown customers.

Padding the Profits?

Banks say they need the surcharges to pay for expanding theirATM networks. Consumer organizations that sponsored the local banssay the fees merely pad the profits of banks that have been closingbranches and laying off tellers.

Both San Francisco and Santa Monica officials plan to appeal tothe 9th U.S. Circuit Court of Appeals, which ruled in a Nevada casein 1990 that states could regulate bank ATMs. That case did notinvolve surcharges, which did not yet exist.

“If cities want to impose consumer protections they can, evenif they’re more stringent than the ones in the federal law,” saidMarc Slavin, deputy city attorney in San Francisco.