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Regulation E: ATM Notices

ATM notice rules have changed, thanks to the Gramm-Leach-Bliley Act. The law now requires operators of ATMs to tell customers - before they incur a fee - that the use of this or another ATM could result in the imposition of a fee. Gone are the days when it was reasonable for the consumer to assume that there could be a fee for the service - especially at an ATM that was operated by an institution with which they had no customer relationship. Just stopping by, so to speak.

There are lots of ways to impose fees, and that is precisely what the bank should tell the consumer. There may be a fee imposed on the customer for using the bank's own ATM. Similarly, the bank may impose a fee on its own customer for using another bank's ATM (a non-proprietary ATM.)

Next are the fees that other institutions may impose. They may impose a fee on non-customers for using their ATM. And they can take it out of the customer's account right then and there. For the unsuspecting - and for those not fully on top of balancing their checkbooks - this fee can cause problems.

So it is only reasonable that the customer paying the fee be told about the fee before it is charged. Whether they balance their checkbook is their problem, but the notice gives them the information they need to do so.

What's required
Notices must explain all of these actual and potential fees so that customers and non-customers don't face costly surprises. The first step is with the initial disclosures that you give the consumer when they open an account or add an electronic transfer feature. Your disclosures to the customer must explain that when they use a non-proprietary ATM, the ATM operator (the other institution) may impose a fee on your customer for using their ATM. This lets the customer know that, even if your institution doesn't charge an ATM fee, they may still pay one to another institution. Your initial disclosures must alert the consumer to this possibility.

Then there are disclosures you must make at your ATM machines. Think of these as the final warning for unwary consumers. This is the last chance notice. If you operate an ATM that non-customers may use and you impose a fee for that non-customer's use, fair play is called for. The ATM operator must post a notice and disclose the amount of the fee.

Notices go in two places: on the ATM itself (the hard notice) and on the screen or paper (the soft notice). Both forms of notice are required.

The notice on the machine must state that a fee will be imposed for providing electronic fund transfer services or a balance inquiry.

The second notice may either be printed on a paper receipt or be shown on the screen of the ATM. This notice must include the fact that a fee may be imposed, and the amount of the fee.

This second notice, given in the context of the transaction, must be completed (shown or given to the consumer) before they go far enough through with the transaction to incur a fee. As a practical matter, showing the message on the screen will be a much surer method than printing a paper statement while the consumer is trying to use the ATM. However, showing the disclosure on the screen may be beyond the capabilities of your ATM equipment. If so, the rule provides for an extended compliance date.

Effective dates
The rule is effective immediately but mandatory compliance is postponed until October 1, 2001. In other words, you may give these notices now (and that would be a very good idea) but you won't be cited for violations until October 1, 2001.

If, however, the programming is not technologically possible on the ATM machines currently in use, you have until December 31, 2004 to upgrade the equipment. This does not exempt the institution from making the disclosure by posting it on the ATM. And we're betting that the bank, not the examiner or consumer, will have the burden of proof.

ACTION STEPS
  • When the weather is nice, take a tour of your bank's ATMs and check the notices posted on them.
  • Next, check the screen statement to be sure that consumers are warned before they make a transaction that triggers a fee.
  • Now make some withdrawals and check the receipt. Also check your account statement.
  • Review any Regulation E training materials to be sure that ATM notices are mentioned. Training should ensure that staff knows what the notices are and how to answer questions about them.
  • Remind staff that notices are important and they should never remove them - even if they don't like the way they look!
Copyright © 2001 Compliance Action. Originally appeared in Compliance Action, Vol. 6, No. 5, 5/01




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