ATM Surcharge Notice Mischief

by Mary Beth Guard, BOL Guru

Financial institutions are unwittingly being duped by clever claimants exploiting two things: l) vandalized ATM notices and 2) the financial institutions' lack of awareness of a little-known amendment made to the Electronic Fund Transfer Act by the Gramm-Leach-Bliley Act. We know of seventeen institutions within one state that have faced claims and, in many instances, settled them for several thousands of dollars without realizing the law would have shielded them from liability. Get the facts from this article so your institution does not suffer an unnecessary loss.

Most financial institutions are well aware of amendments made in 2001 to Regulation E to implement GLBA provisions relating to ATM surcharge notices and disclosures. As we explained in an article published in 2001, ATM Fee Notice Required, ATM operators who impose a surcharge on consumers are required by the Electronic Fund Transfer Act and Regulation E to provide two notices of the surcharge: a general one on or at the ATM in a prominent and conspicuous location; and another, related to the specific transaction, on the screen or on paper given at a time when the consumer still has an opportunity to cancel the transaction and avoid the fee.

Claims for damages have arisen from some consumers who have paid surcharges at ATMs where the surcharge notice is no longer present. Financial institution lawyers looking for relief in Regulation E have found nothing. The regulation clearly mandates the two forms of notice, plain and simple. What they don't realize is that Congress foresaw this potential problem and specifically amended the statute to alleviate financial institutions from liability where the lack of notice is due to wrongful conduct by a third party. Because the protection is found only in the statute -- and not carried through to the regulation -- it is easily missed.

Section 705 of the GLBA amended section 910 of the EFTA regarding liability of financial institutions. The EFTA now specifically provides that ATM operators are not liable for failing to comply with the requirement to post notice if the notice posted at an ATM is subsequently removed, damaged, or altered by any person other than the ATM operator.

The next time a customer tries to sue after a vandal has eradicated your ATM surcharge notice, smile sweetly, reach into your documentation to show when the notice was posted, and provide a copy of 15 USC 1693h (which is Section 910 of the EFTA) to educate them about the protection for liability. Then go post a new surcharge notice on your ATM!

First published on BankersOnline.com 9/23/02