Ugly Surcharge Case

Financial institutions that levy an ATM surcharge have yet another court case that concerns them.

An ATM user, from Seattle, alleges that surcharging its customers at unbranded ATMs the bank owns and operates at off-premise sites violates the Electronic Funds Transfer Act (EFTA). Unbranded machines are those often found in off premise locations that do not display the name of the bank.

The EFTA requires that the customer be told up-front when a fee will be charged, how much the fee is, and gives the ATM user the opportunity to cancel the transaction. The lawsuit charges that none of these requirements were in evidence when Jeremy Knapp used the ATM in his Seattle neighborhood grocery store. To make matters worse, Mr. Knapp claims that when he contacted Bank of America Corp. about the charges to his account, they refunded him the surcharges on his statement, and proceeded to charge him again for his ATM transactions the following month.

The lawsuit has been filed in the U.S. District Court in Seattle. Mr. Knapp and his lawyer are seeking class-action status. If they are successful in their suit, it could mean that any of the bank's ATM customers with similar complaints and charges may qualify for reimbursement. In addition, violation of the EFT Act could mean a damage award of up to $500,000. Washington state law could also award triple damages up to $10,000 per plaintiff to account holders in that state.

Several unsuccessful lawsuits have been filed by state or municipal governments challenging surcharges. This lawsuit is different, and more worrying, because it is being brought against the bank by a consumer. Such a lawsuit could open the door to similar lawsuits in other jurisdictions.

Copyright © 2000 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 10, No. 10, 10/00