Election Section

Federal appeals court frowns on city laws regulating ATM fees

By David Kravets The Associated Press
Friday January 18, 2002

SAN FRANCISCO — A federal appeals court appeared ready Thursday to pull the plug on two California city ordinances regulating fees that banks can charge ATM users. 

The fees in question are those levied by banks on customers who use their ATM machines but do not have an account with that bank. The fees can be as much as $2.50 a transaction. The banks do not charge their own customers such fees. 

During an hour of oral arguments Thursday before a three-judge panel of the 9th U.S. Circuit Court of Appeals, the judges appeared unmoved by lawyers defending the ordinances banning those fees in San Francisco and Santa Monica. 

“What’s the constitutional problem to charge what you want?” Judge Joseph Sneed asked. 

Judge Stephen Trott added: “You are asking them to provide a free service?” 

In July 2000, U.S. District Judge Vaughn Walker in San Francisco struck down the two ATM fee bans — one approved by San Francisco voters and another approved by Santa Monica’s City Council that year. 

Walker ruled that any local ordinances restricting automated teller machine surcharges violate both the National Banking Act and the Home Owners Loan Act, which govern nationally chartered banks and federal savings banks. 

In essence, Walker said that those congressional acts precluded local entities from enacting such legislation. 

San Francisco and Santa Monica noted that federal banking laws do bar local governments from enacting a host of rules on banks, such as regulating certain advertising practices, where they can place ATM machines and whether they can sell insurance. 

But they argued to the appeals judges that they can ban the ATM charges under state consumer protection laws. The states, San Francisco attorney Owen Martikan said, hold the “right to protect the interests of their consumers.” 

Trott later responded: “You’re prohibiting what federal law allows.” 

California cities are not the only ones embroiled in such litigation. 

Several banking concerns are suing Iowa to overturn that state’s ban on ATM surcharges. And Arkansas, Missouri and Wyoming regulate the amount of those fees the banks can charge. 

Banks say they need the surcharges to pay for expanding their ATM networks. Consumer organizations that sponsored the San Francisco and Santa Monica bans, the first by U.S. cities, say the fees merely pad bank profits. 

The circuit did not indicate when it would rule. 

The case is Bank of America v. Santa Monica, 00-16355.