Article

ATM fee placard lawsuits and the 'substantive' right to save time

The Reg E rollback scrapped a federal requirement for redundant fee notices at ATMs, but the letter of the law still trumps logic in pre-repeal lawsuits.

February 26, 2015 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

In case you were wondering: Reg E — the ATM fee placard rule — might not be the law of the land today, but it still prevails in cases filed before its repeal in Dec. 2012.

In a ruling last week, the U.S. Court of Appeals for the 5th Circuit upheld a decision by the U.S. District Court for the Northern District of Texas that the class action suit James L. Frey v. First National Bank Southwest (No. 13-10375), filed in November 2011, should be allowed to proceed since the alleged infraction occurred prior to the passage of H.R. 4367 (the "EFTA amendment").

First National had sought to have the case thrown out on the grounds that the 2012 EFTA amendment applied retroactively to the case. The bank's appeal was put on hold pending the outcome of another, similar case before the fifth circuit court, Lisa Mabary v. Hometown Bank (No. 13-20211).

'A substantive, if small, right'

In the Mabery case, decided in Nov. 2014, the court applied a two-part test established in a precedent-setting 1994 case, Landgraf v. USI Film Products (511 U.S. 244, 265), to determine whether the amendment should be declared retroactive:

First, we "determine whether Congress unambiguously has prescribed the statute's proper reach, determined by applying normal rules of statutory construction to the express language to determine Congress's intent."

Second, if Congress has not clearly expressed an intent to apply the statute retroactively, we determine "whether the new statute would have retroactive effect, i.e., whether it would impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed."

As to the first — in its assessment of legislators' intentions, the court did not consider that lawmakers passed H.R. 4367 precisely because they realized that on-screen notices had for years made physical notices unneccessary. (Arguably, there is precedent for such an assessment, as demonstrated in Judge Richard Leon's mind-numbingly fine parsing of Congress' intentions when it passed the Dodd-Frank amendment.) 

As to the second — the court reasoned that Mabary's rights had indeed been impaired when the bank failed to provide a physical fee notice before the very same fee notice was provided on the ATM screen — prior to the transaction.

And so, to act retroactively would have the effect of "completely depriving Mabary of her claims," the court explained:

Congress's determination that consumers were entitled to the fee information they need to decline a transaction before investing the time needed to initiate it protects a substantive, if small, right, and its deprivation is an injury-in-fact that allows Mabary to pursue her claim here.

Never mind that in striking the placard rule Congress clearly decided that this "investment" was too paltry to protect through legislation. Based on its determination that ATM users have a substantive right not to have their time wasted, the court ruled that Frey v. First National also should be allowed to proceed. (Maybe the courts should also look into sneaky fees that result in high rates of abandoned transactions — and wasted time — for online shoppers.)

An injury-in-fact?

Additionally, the court will decide what, if any, damages Hometown Bank and First National Bank Southwest should pay for annoying ATM users by wasting their time before presenting them with the choice to opt out.

An opportunity, it is worth noting, that neither Mabary and Frey seized in the midst of their presumed "deprivation." Both made the decision to carry on with their transactions and pay the fees — $2 and $3.50 respectively — probably after weighing these charges against the much greater inconvenience of having to spend the time to locate and then travel to a free ATM.

Inarguably, Reg E was on the books when Mabary and Frey filed suit. Also inarguable is the fact that plenty of other ATM deployers before Hometown and First National were forced to defend abusive Reg E-related lawsuits and, win or lose, pay a hefty price because of an outdated piece of legislation. 

But it does seem to defy common sense to continue to waste the U.S. court system's valuable time adjudicating a law that even Congress had the common sense to find pointless.

Read the 5th U.S. Circuit Court of Appeals decision in Lisa Mabary v. Hometown Bank. 
Read the5th U.S. Circuit Court of Appeals decisionin James L. Frey v. First National Bank Southwest.

photo courtesy fdcomite | flickr

About Suzanne Cluckey

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Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally.