Bill Introduced in House to Curtail EFTA ATM Notice Class Actions
On April 17, 2012 U.S. Rep. Blaine Luetkemeyer, R-Mo., introduced H.R. 4367 to amend the Electronic Funds Transfer Act (EFTA) to eliminate the requirement that Automatic Teller Machine (ATM) operators have to post a notice of any transaction fee on or near the ATM. Under the current regulatory scheme, ATM operators are required to post both a notice of a transaction fee on or near the ATM and provide an on-screen notice of the fee during the transaction. Under the EFTA, a consumer who uses an ATM which does not have a notice of a transaction fee posted on or near the ATM, and is charged a fee, can bring an action against the ATM operator and recover statutory damages between $100 and $1,000 for each transaction regardless of whether the consumer suffered any actual injury. In the case of class actions, the EFTA does cap class action damages under the Act at the lesser of $500,000 or one percent of the net worth of the defendant. In addition to damages, the EFTA also provides for attorney's fees and costs.
EFTA ATM notice class actions have become a cottage industry
The availability of statutory damages of $100 to $1,000 per transaction under the EFTA, regardless of whether there is any actual injury, coupled with the provision of attorney's fees and costs, has made EFTA ATM notice class actions a popular cause of action among certain members of the plaintiff class action bar. Certain plaintiff class action firms have created a cottage industry out of filing these cases. One prominent consumer class action firm solicits these cases on its website stating:
ATMs: Many banks impose charges on non-customers who use their ATMs without posting the proper notice on the outside of the ATM that such charges will be imposed. This notice is in addition to a notice appearing on the screen. The failure to provide such notices may entitle you to statutory damages of $100-$1,000 per violation.
Hundreds of EFTA ATM notice class actions have been filed across the country seeking to recover statutory damages from banks, ATM companies and retailers who operate ATMs. Most of these cases allege that the ATM operator is liable to the tune of $100 to $1,000 per transaction for failing to post a notice on or near the ATM itself, that the user will be charged a transaction fee. Plaintiff's counsel recognize that the economics of litigation will frequently cause the defendant to accept a quick settlement. Major banks have agreed to significant settlements to end these cases.
Dog the ATM bounty hunter
The prospect of a quick individual settlement, or an incentive award for serving as a class representative, in an EFTA ATM notice class action, has spawned a new breed of bounty hunter – the ATM bounty hunter who prowls the streets in search of non-compliant ATMs. Perhaps the A&E Network will soon be bringing us a new reality series - Dog the ATM Bounty Hunter. For example, one of the more prolific ATM bounty hunters is Wallace Stilz, III who between March 30, 2010 and April 30, 2012 has filed 14 separate EFTA ATM notice class action law suits in the United States District Courts for the Northern and Central Districts of Illinois. Is it sheer coincidence that Mr. Stilz has in a two year period been "unlucky" enough to encounter 14 ATMs located across the greater Chicago metropolitan and central Illinois area that did not have a transaction fee notice posted on them, or is Mr. Stilz seeking out non-compliant ATMs to collect a bounty under the EFTA?
In a complaint filed on April 25, 2012 in the U.S. District Court for the Central District of Illinois against a central Illinois bank, Mr. Stilz alleges that on April 26, 2011 he used one of the bank's ATMs that did not have a transaction fee notice posted on the machine, that he was charged a fee and that the notice remained missing and was not posted on the ATM until at least Sept. 21, 2011. Several questions come to mind immediately. Why didn't Mr. Stilz alert the bank that the notice was missing on or about April 26, 2011 when he used the ATM? Was Mr. Stilz or someone else lying in wait and monitoring the ATM through Sept. 21, 2011 as he alleged the notice was missing until at least that date? Mr. Stilz does not allege in his complaint that he informed the bank at any time that the notice was missing. Admittedly the EFTA does not require a user to notify the ATM operator that the notice is missing, but if a person were truly concerned about consumers using the ATM wouldn't one expect the bank would have been immediately notified?
Potential for fraudulent claims
The potential for fraudulent claims is present as numerous ATM operators have placed machines into service with transaction fee notices on them only to find after being hit with an EFTA ATM notice class action law suit that the notice had been subsequently removed from the machine by someone without their authorization. While the EFTA provides a safe harbor exception and shields an ATM operator from liability where the operator had posted a fee notice on the machine when it was placed into service and the notice is later removed by someone without authority to do so, the ATM operator has the burden of establishing the notice was posted on or near the machine when it was put into service and that it was later removed by someone without authorization. Frequently an ATM operator is hit with a law suit and incurs litigation expenses before it even has a chance to raise the safe harbor defense.
The need for a notice on the ATM has passed
In an April 20, 2012 letter in support of H.R. 4367 to the Chairman of the House and Senate Financial Committees, the National Association of Federal Credit Unions (NAFCU) points out that the need to post a transaction fee notice on or near the ATM has passed. NAFCU's letter asserts:
A physical placard fee notice may have played a useful role when Congress first enacted the statutory provision in the 1990s. At that time, some consumers might have been unaware that they may be charged a fee for using an ATM. Also, many ATMs were not capable of providing the notice on the monitor. Today, many consumers expect to pay a fee at an ATM unless they are using an ATM owned or operated by the credit union where they have their account or their credit union has a reciprocal network agreement for use of the ATM (as many credit unions do with each other, stemming from their cooperative nature).
The consumer clearly is informed of the existence of a transaction fee in the on-screen notice provided during the transaction and has to affirmatively approve the imposition of the fee. The dual notice requirement does nothing more than breed ATM bounty hunters.
H.R. 4367 to the rescue – death of the ATM bounty hunter?
H.R. 4367 eliminates the dual notice requirement under the EFTA. Specifically it eliminates the need to post a transaction fee notice on or near the machine itself while retaining the obligation to provide an on-screen notice. The bill presently has 19 co-sponsors and it has been referred to the House Committee on Financial Services. If H.R. 4367 is enacted it would be the death knell of the ATM Bounty Hunter.
Suggested Amendment to Make H.R. 4367 Applicable to All Pending Cases
One suggested amendment to H.R. 4367 is appropriate. The bill should be amended to provide that it applies to all existing law suits which have not gone to judgment as of the date of its enactment. This would rescue current defendants staring down the barrel of EFTA ATM class action suits. A similar legislative fix was passed by Congress in 2008 regarding the FACTA amendments to the FCRA which prohibit merchants from printing more than the last five digits of the card number or card expiration dates, on electronically printed credit and debit card receipts. Congress passed the Debit and Credit Card Receipt Clarification Act in 2008 to eliminate liability of merchants who only printed the card expiration date on receipts and provided that the Clarification Act would apply to all pending cases. A similar retroactive application of H.R. 4367 is appropriate. Write your Representative and Senators and urge them to support H.R. 4367.
Bart Murphy is a Litigation partner in Ice Miller LLP's DuPage County, Ill. and Chicago Offices and his practice is concentrated on the defense of class action litigation and complex litigation matters. He has defended multiple clients in EFTA ATM Notice Class Actions and can be reached at firstname.lastname@example.org or (630) 955-6392.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.