STRATEGIC PARTNERS
February 21, 2002
WASHINGTON -- The Supreme Court on April 24 refused to let Iowa impose certain restrictions on ATMs operated by nationally chartered banks, according to the Associated Press.
The court, without comment, rejected Iowa officials' argument that the federal Electronic Funds Transfer Act allows Iowa to exercise such regulatory power.
A 1976 Iowa law imposed a number of restrictions on ATMs, among them requirements that banks that operate them have an in-state office, tell state officials the location of their machines and promise to comply with Iowa law.
The National Bank Act requires national bank branches to comply with state requirements. However, Congress amended that law in 1996 to specify that an ATM is not a bank branch.
Bank One Utah, based in Salt Lake City, challenged Iowa's rules after it was required in 1997 to remove ATMs it had installed at 11 Sears stores in Iowa. The bank's Utah division operates approximately 3,000 of Bank One's 7,000 ATMs.
Iowa banking regulators said the machines violated its requirement that all ATM operators have in-state branches. Bank One filed a federal lawsuit. The court sided with Iowa, saying that federal banking law did not pre-empt the Iowa rules.
But in September 1999, the St. Louis-based 8th U.S. Circuit Court of Appeals reversed the U.S. District Court ruling and ordered the federal trial court to prohibit Iowa from enforcing its ATM law against Bank One. By enacting the 1996 amendment to the National Bank Act, the appeals court said, "Congress has made clear... its intent that ATMs are not to be subject to state regulation."
Without comment, the U.S. Supreme Court on April 24 let the federal appeals court decision stand.
In Iowa's appeal, the state's lawyers said the 8th Circuit court's ruling means "national banks that have deceptive, misleading, unfair or vulnerable ATM operations would thus be able to sidestep every state ATM regulation designed to protect consumers."
However, Bank One's lawyers said the 1996 law made clear that national banks' ATMs no longer are subject to state restrictions.
In a written statement, the Iowa Attorney General's Office said it was "disappointed" that the Supreme Court chose not to hear its appeal. "We will continue to defend Iowa's law in the interest of fairness to consumers and all financial institutions in Iowa."
Bank One's challenge to other provisions of Iowa law, including universal access and mandated routing through the state's Shazam network, is still pending in district court. Bank One has not challenged Iowa's practice of prohibiting ATM surcharging.
