Credit Unions Face another Wave of ATM Fee Lawsuits

Craig Reed
December 30, 2011 | COMMENTS

As another rash of lawsuits continues to be filed against financial institutions for failing to properly disclose automated teller machine (ATM) fees, CUNA Mutual Group reminds credit unions that simple preventative steps can help them avoid costly fines and legal fees.

The lawsuits, which began in 2009, allege violation of section 205.16 of Regulation E. This provision applies when a consumer initiates an electronic funds transfer or balance inquiry at an ATM owned or operated by an institution that does not hold the account to or from which the transfer is made, or about which an inquiry is made.

As of June 30, 2011, CUNA Mutual Group had 44 open claims related to class action lawsuits alleging violations of Reg E. The suits span 14 states, with litigation and loss exposure expected to exceed $3 million.

When credit unions charge a fee to a consumer using a non-credit union ATM network card or debit card, section 205.16 of the regulation requires:

• Posting a sign in a prominent and conspicuous location on or at every ATM owned or operated by the credit union stating that a fee will (or may) apply; and
• Disclosing the fee on the terminal screen or paper notice before the consumer is committed to paying the fee. It is not necessary to include the amount of the fee on the sign.

Additionally, section 205.9 of the regulation requires the amount of the fee to appear on the receipt. Violation of Reg E could result in a fine of up to $500,000, plus costs and attorney fees based on the class action filing.

The lawsuits typically involve missing signage on or at the ATM and incorrect fees disclosed on the sign at the ATM. In addition, many of the lawsuits involve remote ATMs serviced by third-party vendors. Many credit unions involved in the lawsuits erroneously believed the fee notice sign was not necessary since the fee was disclosed on the terminal screen of the ATM.

CUNA Mutual Group recommends ATMs be inspected on a weekly basis or when the ATM is serviced, whichever provides for more frequent inspections. Credit unions should also photograph each ATM at the time of inspection, maintain a log to track the inspections for all ATMs, and have management periodically review the log to ensure proper inspections are taking place. These steps may also assist in the defense of a potential class action lawsuit.

At a minimum, the ATM inspection log should contain:

• ATM location inspected
• Date of inspection
• Status of ATM fee sign/notice (missing or present)
• Action taken (e.g., replaced sign/notice)
• Initials of employee performing the inspections

Reprinted with permission from Anthem, the publication of the Northwest Credit Union Association (www.nwcua.org).