"Enough already."

This was the gist of a letter sent on Feb. 8 by the NACS and six cosigners to the House Committee on Financial Services.

The letter petitioned the committee for "assistance in eliminating an unnecessary ATM fee disclosure requirement that has encouraged a large and growing number of frivolous lawsuits across the nation."

The disclosure in question relates to an FDIC regulation (Regulation E — 12 CFR 205.16) enacted in 1991 that required anyone operating an ATM to "post in a prominent and conspicuous location" a notice that fees will (or may) be charged for a balance inquiry or electronic fund transfer services.

The same notice was to be displayed on the ATM screen, though regulations allowed an exemption for machines that lacked the technical capability to comply. When that exemption expired on December 31, 2004, the "placard rule" became annoyingly redundant. Worse, said Bryan Bauer, president of Kahuna ATM solutions, it became detrimental.

"At that time surcharge was just becoming public. Consumers maybe hadn’t used an ATM before," he said. "But it’s one of those things that’s past its useful life and it’s causing huge problems in our industry."

By way of example, Bauer described a fax he received in the past week from an attorney in Massachusetts, who was threatening to file a complaint in regard to an ATM in eastern Texas. The fax "basically stat[ed], 'I have drafted a complaint, I’m looking to file this within the next week or so … Call me to resolve this before I file the complaint,'" said Bauer.

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Never mind that the ATM in question was not one affiliated with Kahuna. If a complaint were filed, the company would be required to respond, at which point the clock would begin on attorney’s fees. "In my opinion, there’s no doubt about it, it’s modern day extortion," Bauer said.

Josh Ettesvold, president of Express Teller Services, also voiced annoyance that the rule was still in effect given that nowadays the ATM itself is programmed to preclude user ignorance about fees. "It prompts you on the screen and you have to accept the fee," he said. "So even if [the notice] is not affixed to the ATM, you still have to accept the fee by pressing the button, 'yes, I accept' or 'no, I decline'. So to me it’s frivolous." 

Such frustration can be heard throughout the ATM industry, where to date placard lawsuits have been filed in 20 states.

As of last June, CUNA Mutual alone reported 44 open claims related to class action lawsuits alleging violations of fee disclosure regulations. Loss exposure for these cases was expected to exceed $3 million. Many such cases are never tried, but are instead settled out of court just to get rid of them.

And it’s not just FIs and other owners who have found themselves in legal skirmishes over the placard rule, said Howard Latshaw, national sales manager for the ATM branding firm GetBranded.com. "[Plaintiffs] just go in and sue everybody that’s involved," he said. "They sue the merchant, and if there’s a bank sponsor they sue the bank sponsor and sue the ISO and the deployer. So they just sue everybody and then whoever has the deepest pockets usually ends up paying on it."

Latshaw said he hears regularly from deployers who have fought — or are engaged in fighting — placard complaints. "We generally field maybe one or two calls a week from customers that are either in litigation or have gone through a lawsuit and they’re looking for a better way to protect the fee notification," Latshaw said. Generally, he said, these were operators that had applied decal signage. "The big problem is that [people] remove the decal and take pictures of it and start a class action lawsuit."

One solution to this problem is to incorporate the fee notice into mid-topper signage, which is much more difficult to remove. Ettesvold largely credited this approach for the fact that his company had not been named in a lawsuit to date. Express Teller replaces the basic mid-topper signage that comes on all of its new machines with a branded panel that includes the fee notification. "If anyone wants to get that ATM wrapped in a lawsuit or accuse us of having noncompliance, they’re going to have tear that entire mid-topper off the machine in order to get it," he said.

Ettesvold said that the replacement signage cost about $20, as opposed to the cost of a sticker, which was about $2. According to Latshaw, the cost of adding a topper to a machine that didn't originally have one was about $200 — which is often still less expensive than an hour or two of a lawyer’s time.

Removing the stickers for good

Bauer was confident that the efforts of industry members would eventually result in the repeal of the placard rule. "I think there’s a good chance of us being successful here," he said. "It’s been brought to the attention of several of the right people to make a change. It’s just with anything it takes time."

The current pre-election gridlock in Congress and many government departments makes it very difficult to guess when that might be. Additionally, said Bauer, it was not entirely clear whether the regulation could simply be scrapped by the Fed or would require Congressional action, which might be slower and more complicated.

In the meantime, Ettesvold said, an ATM operator could minimize the likelihood of a lawsuit with a mid-topper, or barring that option, could employ simple procedures that would prove that physical notification had been applied to the ATM, but that it had either fallen off or been taken off. He recommended that deployers:

1. Address signage requirements in policies and procedures. Include instructions in all implementation, service call and cash drop checklists to confirm that the notice is in place.
2. Conduct periodic reviews of ATMs to ensure that fee-notice stickers are affixed. At the same time, take date-stamped photos of the terminal, including buildings or landmarks around it for visual context. Take new photos if an ATM is moved to a different location.
3. Document that stickers have been applied at the time of installation. Take a date-stamped photo of the sticker being placed on the machine.
4. Demonstrate that a sticker has been removed by taking photos of the sticky residue left behind.

"It’s sad that we have to play defense on this," Ettesvold said. "When [a change] happens we automatically have to try to figure out, okay, how are we going to prevent a lawsuit and you have to get creative, and unfortunately it’s not cheap to do that."

For more information on this topic, visit our regulatory issues research center.