STRATEGIC PARTNERS
March 7, 2002
DES MOINES, Iowa -- Iowa's long-standing rule banning ATM surcharges was overturned on March 7 by a federal judge in Des Moines, according to a report in the Des Moines Register.
Until now, Iowa was the only state to successfully bar banks from assessing an extra fee on ATM withdrawals by non-customers.
The decision by U.S. District Judge Ronald Longstaff overturns a state banking regulation that had prohibited a user's fee since Iowa became the first state to establish a statewide ATM network in 1977.
The ruling applies to only banks that have national charters, but it opens the door for smaller, state-chartered banks to lobby for their own ATM fees to compete, banking industry groups said.
"It is very important that state banks be allowed the same pricing decisions and pricing flexibility and that a level playing field is maintained," said John Sorensen, president of the Iowa Bankers Association.
The nationally chartered banks behind the ruling - Wells Fargo, Firstar, Bank of America, Metrobank and US Bank - argued that surcharges were legal under national banking law, which trumped state law.
The Iowa attorney general's office and the Iowa superintendent of banking - both of whom fought the lawsuit - have 30 days to appeal the decision, but they have not decided whether to do that.
"We respect the decision of the court, but we are disappointed," said Iowa Solicitor General Dennis Johnson.
"We feel the judge's decision is consistent with industry practice," said Jan Estep, executive vice president for the transaction services division of US Bank.
H. Lynn Horak, chief executive officer of Wells Fargo's Iowa banking operations, said his bank has not determined how much to charge non-customers or when the new fees will start.
"My guess is roughly in the next 30 days or so," he said. "Customers do have a choice. It is similar to walking into a convenience store and buying a liter of pop and a gallon of milk. You pay more than at a grocery store because it's convenient."
For years, Iowa and Connecticut were the only two states to successfully block the second ATM fee. The Connecticut Supreme Court lifted that state's ban in 1999.
Some cities in California have also tried to ban surcharges, but the 9th U.S. Circuit Court of Appeals appears ready to rule against two of those bans, by San Francisco and Santa Monica.
March 5's decision was foreshadowed by a 1997 case involving Bank One.
Bank One, which did not have a charter to operate in Iowa, in 1997 put ATMs into 24 retail stores. The state superintendent of banking said the machines were illegal because Bank One did not have an Iowa office. The bank removed the machines and sued.
Judge Longstaff sided with the state in 1998, but Bank One appealed, and the court of appeals ruled 2-1 in favor of the bank, citing Bank One's national charter. State officials tried to appeal, but the U.S. Supreme Court turned down their request for a hearing.
