Credit unions in Texas and Louisiana are facing lawsuits this month for failing to properly disclose ATM fees. New York resident Don Anderson is alleging violations of the disclosure provisions of the Electronic Funds Transfer Act (EFTA), also known as the Federal Reserve Regulation E.
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 EFTA 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 (It is not necessary to include the amount of the fee on the sign). and
Disclosing the fee on the terminal screen or paper notice before the consumer is committed to paying the fee.
Section 205.9 of the EFTA also requires the amount of the fee to appear on the receipt. A violation of Regulation E could result in a fine of up to $500,000 plus costs and attorney fees based on a class action filing.
The lawsuits typically involve missing signage on or at the ATM and/or incorrect fees disclosed on the sign at the ATM. Additionally, many of the lawsuits that have been filed involve remote ATMs serviced by third-party vendors. These lawsuits can be avoided simply by inspecting the ATMs regularly to ensure the fee sign is intact. According to CUNA, these signs are sometimes removed or defaced by customers. Credit unions may also avoid these lawsuits by not placing the precise fee amount on the sign itself, since the regulation does not require the amount of the fee to appear on the sign.
This summer, CUNA Mutual Group released alerts addressing earlier waves of similar lawsuits. CUNA and CUNA Mutual are working diligently with legislators and regulatory agencies to facilitate legislative change to Regulation E's requirement that signs be placed on or at every ATM, as they believe it is redundant since the consumer also receives the notice on the screen before completing a transaction at the ATM. For instance, CUNA has written to the Consumer Financial Protection Bureau asking it to address the situation; however, obviously there can be no guarantees of legislative or regulatory relief at this point.
Credit unions should implement the following risk mitigation strategies:
To ensure ATMs meet Regulation E's signage requirements, credit unions should do the following:
If you have any questions about these requirements or recommendations, please feel free to contact me using the information below.
CUNA Asks CFPB to Change Signage Requirements
With another round of lawsuits filed this week concerning ATM notices, CUNA President Bill Cheney has asked the Consumer Financial Protection Bureau (CFPB) to exercise its authority under the Electronic Fund Transfer Act, Regulation E, to no longer require notices on the outside of an ATM. Currently under Reg E, ATMs are required to display notices that a fee for using the ATM may or will be charged. More detailed disclosures are required on ATM screens prior to payment of the fee. It appears that outside ATM notices are in some cases being removed, destroyed or damaged and that pictures are taken of the ATM to show noncompliance. Instead of going to the credit union or the regulator about noncompliance, ATM “chasers” as Cheney called them in his communication with the CFPB, are going straight to court. The CFPB has authority to no longer require the outside notices. If the agency cannot act on this at this time, possibly because it lacks a director, CUNA urged them to support legislation to repeal the duplicative outside ATM notices. Click here to access CUNA’s letter.