Law Will Protect Banks and Credit Unions from Frivolous Lawsuits

President Obama signed into law on December 20 a bill (HR 4367) that would protect banks and credit unions from frivolous lawsuits by repealing an outdated, duplicative requirement that a placard must be attached to ATMs stating that a fee may be charged.

If the placard was not attached to an ATM, a consumer may recover statutory damages of between $100 and $1,000 for each transaction. Successful class-action plaintiffs could recover up to $500,000. As a result, a cottage industry developed where some people were removing placards, photographing ATMs without them and filing lawsuits.

However, the placard requirement is unnecessary because ATM operators are required to disclose fees on ATM screens and consumers have the right to decline the transaction without being charged.

Bill Would End Frivolous ATM Lawsuits

House Financial Services Committee members Blaine Luetkemeyer (R-Mo.) and David Scott (D-Ga.) on April 17 introduced legislation (H.R. 4367) that would protect banks and credit unions from frivolous lawsuits by repealing the outdated requirement that a placard must be attached to ATMs stating that a fee may be charged.

The placard disclosure is duplicative because the actual fee also appears on the ATM video monitor before the transaction is completed. But if the placard isn’t attached, Regulation E (Electronic Funds Transfer Act) permits successful class-action plaintiffs to recover the lesser of $500,000 or 1 percent of the ATM operator's net worth plus attorneys’ fees and costs.

As a result, some people have removed placards, photographed ATMs without them and filed lawsuits.

In a February letter, ABA and six other trade groups asked the House Financial Services and Senate Banking Committees to pass a bill repealing the placard requirement because such lawsuits were growing precipitously and could reduce both the number of ATMs and consumer convenience.

This is a bill that both banks and credit unions can support.

Read the letter.

Read the bill.

Repeal Outdated ATM Disclosure Requirements

ABA, CUNA and five other trade groups asked the House Financial Services and Senate Banking Committees to pass a bill repealing the outdated requirement that a placard must be attached to ATMs stating that a fee may be charged.

The disclosure is duplicative because the actual fee also appears on the ATM monitor, the trade groups said in a letter. The "requirement ... has encouraged a large and growing number of frivolous lawsuits across the nation" that could reduce both the number of ATMs and consumer convenience, they said.

The trade groups explained that if the placard isn't attached, Regulation E permits successful class action plaintiffs to recover the lesser of $500,000 or 1 percent of the ATM operator's net worth plus attorneys’ fees and costs.

Read the letter.