Monday, October 28, 2002
Ninth Circuit Rejects Local Ordinances Banning ATM Fees
By a MetNews Staff Writer
Local ordinances barring banks from charging non-accountholders for the use of automatic teller machines are preempted by federal law, the Ninth U.S. Circuit Court of Appeals ruled Friday.
Upholding an injunction issued by U.S. District Judge Vaughn R. Walker of the Northern District of California, the panel held that the Santa Monica and San Francisco enactments violate the Home Owners’ Loan Act and the National Bank Act.
The state’s largest banks, including Bank of America and Wells Fargo, sued to block the charges as soon as the ordinances were enacted in 1999. The plaintiffs blocked ATM service to non-depositors rather than provide those services for free, then obtained a preliminary injunction in 1999 barring enforcement of the ordinances.
The injunction was made permanent in June 2000. The cities’ appeal resulted in the filing of numerous amicus briefs, with Attorney General Bill Lockyer and the California Public Interest Research Group supporting the cities while federal regulators and the Pacific Legal Foundation supported the banks.
Senior Judge Joseph T. Sneed, writing for the Ninth Circuit, noted that the Home Owners’ Loan Act grants federal savings associations—such as California Federal Bank, which intervened in the litigation—the right to “establish remote service units” and that the Office of Thrift Supervision, which regulates FSAs, permits them to use “electronic means or facilities” such as ATMs “to perform any function, or provide any product or service” and to charge any “customer” for the use of such service.
The act and the OTA regulations, Sneed said, reflect congressional intent to completely occupy the field of fee regulation. States and localities are thus precluded from banning or limiting the fees that FSAs may charge for services, including ATM use, he said.
The National Bank Act, Sneed went on to say, similarly preempts regulation of fees charged by national banks such as B of A and Wells Fargo. The Office of the Comptroller of the Currency, which regulates national banks, has regulations similar to those of the OTS, he said, adding that its interpretation of the banking act as allowing banks to charge fees to non-depositors is entitled to “great weight.”
The judge went on to reject the argument that the ordinances constituted consumer protection measures authorized by the Electronic Funds Transfer Act.
Nothing in the act, Sneed said, prohibits or limits ATM fees or authorizes state and local officials to regulate them. “The EFTA was enacted to prevent fraud, embezzlement, and unauthorized disclosure in electronic fund transfers, not to regulate service fees charged by financial institutions,” the judge wrote.
While the EFTA contains an anti-preemption provision, the judge added, the provision applies only to regulations that might otherwise be deemed to conflict with EFTA, not to those that conflict with other laws such as the HOLA and the National Bank Act.
Senior Judge Alfred T. Goodwin and Judge Stephen S. Trott joined in the opinion.
The case is Bank of America v. City and County of San Francisco, 00-16355.
Copyright 2002, Metropolitan News Company