Schools Financial's Merger Notice

Beyond the usual happy talk about how the merger will benefit credit union members, the merger notice of Schools Financial Credit Union (Sacramento, CA) includes information about merger-related compensation and distribution of net worth to members.

Schools Financial Credit Union is proposing to merge with Schoolsfirst Federal Credit Union (Santa Ana, CA).

First, the credit union states that a vote for the merger will result in an up to $4 million special dividend distribution from net worth to the credit union's members. The distribution will take place on a one-time (pro-rata) basis, with individual dividends being calculated based on average month-end deposit balances in the six (6) month period from June 1, 2019 to November 30, 2019.

Second, the notice disclosed the merger-related compensation for five employees of Schools Financial. Tim Marriott, President/CEO of Schools Financial CU, could earn up to a maximum $8,011,532 in merger-related compensation. However, the notice states that the the likely amount of compensation could be significantly lower.

Also, all employees of Schools Financial Credit Union, except Mr. Marriott, are being offered retention bonuses to help ensure a smooth transition and successful integration of the merger.

The date of the member's vote is December 12, 2019.

Merger Notice.

NCUA Denies Request on Bids for Two Failed Taxi Medallion Lending CUs

The National Credit Union Administration (NCUA) denied my request for information on bids for failed taxi medallion lenders LOMTO Federal Credit Union and Melrose Credit Union.

Teachers Federal Credit Union assumed the members and most shares as well as some loans and other assets of LOMTO FCU and Melrose CU.

In early October, I contacted NCUA seeking information on the bids for the two failed credit unions.

An NCUA spokesperson replied:

Q: Was Teachers FCU the only bidder for LOMTO? If not, how many bidders were there? If there were multiple bidders, how did Teachers bid compare to others?

A: Decline comment.

Q: Was Teachers FCU the only bidder for Melrose? If not, how many bidders were there? If there were multiple bidders, how did Teachers bid compare to others?

A: Decline comment.

Subsequently, I filed a Freedom of Information Act (FOIA) request seeking written documents, such as a bid summary of winning and losing bids shared with the NCUA Board .

On November 23, NCUA denied my FOIA request citing exemptions at 5 U.S.C. 552(b)(4), (5), (6), and (8).

But why this lack of transparency?

Unlike NCUA, the Federal Deposit Insurance Corporation discloses a bid summary regarding all bids to purchase a failed bank.

It appears that NCUA is abusing FOIA exemptions to deny access to information that another federal agency openly discloses.

Greater Transparency Needed at NCUA

I know that I sound like a broken record; however, the National Credit Union Administration (NCUA) needs to become more transparent regarding its decisions with respect to credit union applications.

Recently, NCUA approved an application of Jefferson Financial FCU (Metairie, LA) to issue $12 million in secondary capital.

Unfortunately, the agency did not disclose its decision on this application.

I requested information regarding Jefferson Financial's application. An NCUA spokesperson stated that "as for any specifics regarding the Jefferson Financial Federal Credit Union’s secondary capital plan, those are confidential."

NCUA's behavior is different from the other federal banking regulators. The other federal banking regulators publish their decisions regarding applications from their regulated institutions.

Hopefully, NCUA will alter its behavior and start to disclose its decisions regarding credit union applications.

GAO: Privately Insured CUs Comply with Disclosure Requirements; But Rules Can Be Clarified

The Government Accountability Office (GAO) reported that privately insured credit unions largely complied with the Bureau of Consumer Financial Protection (CFPB) requirements to disclose that they do not have federal deposit insurance.

Federal law (12 U.S.C. § 1831t(b)) requires that any depository institution that does not have federal deposit insurance clearly and conspicuously disclose that the institution is not federally insured.

Regulation I, which is administered by the CFPB, requires disclosure that an institution does not have federal deposit insurance (1) at locations where deposits are normally received (stations or windows) except enumerated exceptions, (2) on the institution’s main Internet page (website), (3) in all advertising except enumerated exceptions, and (4) in periodic statements and account records. Also, Regulation I generally requires depository institutions to obtain a written acknowledgment from depositors that the institution does not have federal deposit insurance.

GAO found that 45 of the 47 privately insured credit unions that they visited displayed a disclosure at teller windows. However, 7 of the 17 credit unions with drive-through windows did not have disclosures at the window. GAO noted that the dimensions and font sizes of the disclosure signage varied among credit unions, with some having signage too small to be easily read, or not placed conspicuously.

GAO also reviewed 102 privately insured credit union websites and found that almost all of these websites complied with CFPB’s requirement to disclose on their main Internet page that the institution is not federally insured. However, on 28 of 99 websites the disclosures were not easily seen or readable. Over half of the websites used used a font size that was smaller than that used for the other text on the same webpage.

With respect to printed material, 8 of the 36 credit unions had at least one item that did not contain a disclosure.

While compliance with Regulation I is high, GAO believes that Regulation I may be interpreted and enforced differently by different credit unions and state regulators. GAO wrote: "Without clarity on whether or not drive-through windows are required to have disclosures, some credit unions may continue to not display them at these windows. Additionally, without more clarity or guidance around dimensions and font sizes for disclosures, the disclosures may be too small to be easily read or noticed."

GAO recommended that the CFPB should issue guidance to:

• clarify whether drive-through windows require disclosures; 
• describe what constitutes clear and conspicuous disclosure, including minimum signage dimensions and font size for disclosures; and 
• explain and provide examples of which communications are advertising.

Read the GAO Report.

Disclosures, Supplemental Capital, and Material Risk

The National Credit Union Administration (NCUA) is seeking input regarding disclosures for credit unions issuing supplemental capital.

The credit union Call Report does not provide adequate disclosures about material facts affecting a credit union to protect investors.

According to the Advanced Notice of Proposed Rulemaking, "[t]he disclosure must not contain any untrue statement of a material fact and must not omit to state a material fact ... the disclosure must be clear, accurate and verifiable."

Topics that should be covered in the disclosure include:

• Material risks relating to the issuer and the industry in which the issuer operates;
• Material risks relating to the security being offered;
• The issuer’s planned uses for the proceeds of the offering;
• Regulatory matters impacting the issuer and its operations;
• Tax issues associated with the security being offered; and
• How the securities are being offered and sold, including any conditions to be met in order to complete the offering.

In other words, credit unions issuing supplemental capital will be required to provide details about their business models. This would include discussion about the type of lending by credit unions, risk profile of these loans, geographic diversity of loans, any legal actions that could materially impact the operations of credit unions, and so on.

In addition, to protect investors, credit union regulators will need to end their practices of not publishing enforcement actions. In 2015, there were 286 outstanding unpublished Letters of Understanding and Agreement. These unpublished enforcement actions identify material risks that are affecting the operation of credit unions. This is information that investors would find important.

Moreover, credit unions will be expected to provide "ongoing communications with investors, reporting of compliance with the contractual covenants, and sharing of information with current and prospective investors."

The Board notes that "[f]ailure to comply with the investment contracts or to properly monitor communications and sharing of information could subject the credit union to liability, which could negatively impact the Share Insurance Fund."

Underserved Area Bill Adds Reporting Requirement

H.R. 5541 (Financial Services for the Underserved Act of 2016) adds a new reporting requirement for a federal credit union that adds an underserved area.

Currently, only federal credit unions with a multiple common bond charter are permitted to add underserved areas to their fields of membership. However, these multiple common bond credit unions are not required to report information regarding how they are serving those underserved areas.

H.R. 5541 will permit all federal credit unions to add underserved areas to their fields of membership; but requires them to report information on the underserved areas added.

Specifically, a federal credit union that receives an underserved area approval from the National Credit Union Administration (NCUA) will be required to report annually on the number of members who are members due to the underserved area application and the number of offices or facilities maintained by the credit union in the underserved area.

The bill would also require NCUA to publish this information annually.

Read the bill.

Whe Doesn't NCUA Publish Bid Summaies for Failed CUs?

The National Credit Union Administration (NCUA) should start publishing the bid summaries for credit unions in receivership just like the Federal Deposit Insurance Corporation (FDIC) does for failed banks.

Since November 12, 2009, the FDIC has disclosed the results of bids for failed banks in FDIC receivership. The FDIC Board decided that disclosing this information was in the public interest and also met the Congressionally mandated objective that resolutions of failed banks are at the lowest cost.

For example, here is the bid summary for North Milwaukee State Bank (Milwaukee, WI). The summary discloses the name of the winning bidder and a summary of the winning bid. It also shows the other bids received and it lists the name of the other bidders. [Note: not all bank failures have multiple bidders].

Federally-insured credit unions should request that the NCUA Board begin disclosing summaries of bids for failed credit unions. Disclosing this information would provide more accountability and transparency with regard to the resolutions of failed credit unions by the NCUA.

Quality of Credit Union Annual Reports Varies Greatly

There is a lot of variability in the quality of annual reports issued by larger credit unions.

Some credit unions provide detailed financial information to their members in their annual reports. which includes audited financial information. Some of the better annual reports that I have reviewed have been issued by Quorum FCU, Pentagon FCU, Navy FCU, State Employees' CU, and University of Wisconsin CU.

However, other credit unions provide their members with very little information about their financial performance in their annual reports.

For example, Truliant FCU (Winston-Salem, NC) in its 2014 annual report only discloses summary balance sheet information. There is not any information from the income statement or statement of cash flows. The credit union does not provide any notes that elaborate further on the credit union's financial performance.

Another disappointing 2014 annual report is from University Federal Credit Union (Austin, TX). But it provides a little more information than Truliant FCU.

The same is true for Richmond, Virginia-based Virginia Credit Union's 2014 annual report.

If credit unions truly believe their members are owners, they should be making their audited financial statements available to their members on their websites.

Texas Keeps CU Enforcement Actions Confidential

The November 2014 newsletter of the Texas Credit Union Department on page 3 stated that enforcement actions taken by the Texas Credit Union Department are confidential information, according to the Texas Finance Cose.

The newsletter noted that "determination letters, cease and desist orders, removal orders and documents related to these are confidential documents." The newsletter did note that only in rare and exceptional cases can the Commissioner make public these orders.

The newsletter also pointed out that conservatorship orders are protected from disclosure. I think members have the right to know when their credit union is taken over by the state.

Other state credit union regulators, such as Illinois, Washington, Oregon, and California, make these enforcement orders public.

The Texas legislature should amend its statute to allow for the publication of these enforcement orders.

Transparency and the preservation of the confidentiality of exam related documents are not mutually exclusive.

Read the newsletter.

Once Again, NCUA Fails to Disclose Enforcement Order

During the closed National Credit Union Administration (NCUA) Board meeting on October 23, the NCUA Board considered an administrative enforcement action under Section 206 of the Federal Credit Union Act.

The agency also decided to keep this administrative enforcement action confidential.

However, keeping administrative enforcement actions confidential was not the intention of Congress, when it enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Congress wrote that the federal banking agencies, including NCUA, were to make public administrative enforcement orders.

While the Federal Credit Union Act does allow NCUA to not publish an administrative enforcement action if it is in the public interest, I believe lawmakers wanted this discretionary authority to be rarely used.

NCUA's fears that such disclosures will harm a credit union is ill-founded. There is no evidence that the publication of an enforcement order will harm a depository institution.

By keeping this administrative enforcement action confidential, the NCUA Board is once again thumbing its nose at the rule of law.

PenFed Discloses Senior Management Pay, Other FCUs Should Do the Same

As readers of this blog know, I have be an advocate of credit union transparency with regard to the pay of senior executives.

State chartered credit unions disclose the compensation of their senior management in their Form 990 filings with the Internal Revenue Service.

On the other hand, federal credit unions are not required to file Form 990s. As a result, credit union members and taxpayers do not have the ability to evaluate the pay of senior management and to determine if this valuable tax exemption that credit unions receive is being diverted into excessive compensation of senior federal credit union officials.

However, I was very pleased to see that Pentagon Federal Credit Union is disclosing the pay of senior management.

In Note 15 of its 2013 Annual Report, Pentagon Federal Credit Union discloses the compensation package of its CEO and 8 other senior executives.

Also, Note 15 discusses how the credit union sets the pay for senior management at the credit union.

The only criticism is that Pentagon Federal Credit Union could have provided more granularity with regard to pay by separating salary (or base pay) from bonus.

Other federal credit unions should follow Pentagon Federal Credit Union's example and disclose the compensation of their senior management.

NASA FCU's Surprising CD Disclosure

Bankaholic recently reported on a surprising disclosure related to NASA FCU's share certificate or certificate of deposit (CD) rates.

The disclosures stated the following regarding CD rates: “The rate will not change during the term of your certificate unless the Credit Union notifies you at least 30 calendar days prior to any rate decrease.” (emphasis added)

Here is a link to the certificate terms and conditions disclosures.

In other words, NASA FCU can lower the rate on an outstanding fixed-rate share certificate without the approval of the member as long as it provides such a notice.

This clause does not seem to be in the best interest of the member.

The blogger reminded consumers that they should "review this legally mandated summary of terms in advance of establishing an account with a new institution."

NCUA Will Not Disclose Stress Test Results

The National Credit Union Administration (NCUA) Board decided on April 24 to not publicize the stress test results for credit unions with $10 billion or more in assets; but stated that they may revisit its decision in three years.

The NCUA Board set forth several arguments against publishing the stress test results.

First, the Board noted that credit unions are cooperatives and not publicly held institutions. So, "the public policy goals of providing information to market participants and facilitating market discipline are of reduced importance in the case of credit unions."

Second, the Board believes that if the stress test results are published, these "results could be taken out of context or misreported in public media. This could lead members to faulty conclusions about their credit union’s current health, and cause a run on deposits."

I believe this concern by the Board is overblown. The Federal Reserve publishes the stress test results for large banks and there have not been any runs. In fact, the evidence would suggest that the disclosure of these results reduced market uncertainty and increased market confidence in these institutions.

Third, NCUA views the stress test as a supervisory tool akin to CAMEL Ratings, which are not published.

Fourth, NCUA is concerned that disclosing the results will put greater pressure on credit unions to always show positive outcomes. The agency worries that credit unions approved by NCUA to conduct their own stress tests after three years would alter their assumptions instead of raise additional capital, which subverts the purpose of the rule.

But shouldn't NCUA review the assumptions and models of these large credit unions to ensure that their assumptions and models are realistic?

In addition, the Board believes that the member and the public have adequate information about the the credit union's performance with the posting of current and past Call Reports on its website. Therefore, there is not need to disclose this stress test results.

However, the Call Report does not tell you the adequacy of the credit union's capital (net worth) under financial stress. I recognize that the stress test is a "what if" analysis; but it can be used by members and future members to assess the financial resiliency of these large credit unions.

I believe NCUA's decision to not publish the stress test results will in the long-run create more uncertainty. People will wonder what is NCUA hiding.

NCUA Can Immediately Take Action on Charter Choice and Disclosure

ABA submitted a Statement for the Record for an April 8, 2014 hearing before the House Financial Services Committee.

While the majority of ABA's Statement for the Record addresses a number of regulatory issues ranging from bank examinations to the new mortgage rules, it also focused on two issues that the National Credit Union Administration could immediately address -- charter choice and disclosure.

On the issue of charter choice, ABA wrote:

Many credit unions today have determined to mirror everything a bank does and the National Credit Union Administration (NCUA) seems anxious to accommodate those desires rather than protecting the expansion of the credit union subsidy paid by taxpayers and ensuring it is appropriately directed. If credit unions want to act like banks, there should be a simple, fair and workable path to convert to a mutual bank charter—a process that NCUA has thwarted at every turn. The process must be straightforward and predictable, without NCUA’s patronizing proposition that credit union members do not understand their ownership rights and interests in a conversion—and if they did, would never vote for a conversion. This is NCUA protecting its turf and not protecting taxpayers.

With regard to transparency, ABA wrote:

Most tax-exempt organizations, including universities and hospitals, must disclose the compensation of senior officials to the Internal Revenue Service in the Form 990—a form that has become an important tool for determining the transparency and accountability of tax-exempt organizations. By publicly disclosing this information, the Form 990 fosters good corporate governance as it attempts to ensure that the tax expenditure is being appropriately employed.

Federal credit unions should be required to file Form 990 information return or its equivalent just like state-chartered credit unions and most other tax-exempt institutions. These are actions that can and should be done by NCUA today. Expanding the public’s opportunities to review executive salaries would promote improved corporate governance and greater credit union accountability. It would inform Congress, taxpayers, and credit union members about whether this valuable tax subsidy is going towards the credit union mission or is subsidizing credit union management.

Read the full Statement for the Record.

Publishing Stress Test Results, CU Trades Say Nyet

Credit union trade associations gave a thumbs down to the idea of publicly disclosing the stress test results for credit unions with $10 billion or more in assets.

The Credit Union National Association (CUNA) in its comment letter stated that the public disclosure of stress test results is neither appropriate nor useful for credit unions. CUNA wrote:

"We realize that the bank regulators make such information public. However, we do not think such disclosure is appropriate for credit unions. Credit unions already have a number of incentives to avoid risks. This includes limits on how credit unions build capital, limits on activities and investments, and certain membership conditions. A number of mortgage lending credit unions are also concerned that the new mortgage rules, particularly with the emphasis on “qualified mortgages,” may mean they will limit loan offerings for those who do not meet QM requirements.

No one knows for certain what the impact of the disclosure of stress test results would be on covered credit unions. (One good reason in itself not to disclose the results.) It is easy to see, however, that such disclosure could result in self-limiting of services if credit unions fear risk taking will result in a poor showing under the stress testing.

Public disclosure of stress tests may be appropriate for banks, many of which are publicly traded. However, we cannot agree that it is appropriate or useful for credit unions, and we urge NCUA not to pursue this approach."

The National Association of Federal Credit Unions (NAFCU) also advised against making public the stress test results. NAFCU wrote:

"[i]f the NCUA insists on pursuing stress testing and capital planning, it should allow credit unions at least two full reporting cycles to evaluate the necessary resources and identify any potential implementation issues. Only after assessing the results from these cycles should the NCUA promulgate final stress testing and capital reporting requirements. The NCUA should also refrain from making a decision regarding public disclosure until after making such assessments. Banking prudential regulators make these results public because this information could be pertinent to the banks’ investors, and therefore, increased transparency is necessary for the public investment markets to function properly. Credit unions on the other hand have members-owners, not investors. Given that there may be potentially sensitive confidential exam information in the stress testing results, the NCUA should not disclose these results without finding of a compelling reason to do so or examining the issue further."

In addition, the National Association of State Credit Union Supervisors (NASCUS) believed that results of NCUA’s stress testing should not be disclosed; but rather treated as confidential examination product. NASCUS noted that "the inexperience of the credit union system administering a formal stress testing regulation" and "the uniqueness of credit union structure" were compelling reasons to not publicize the results.

NASCUS echoes NAFCU's position that credit unions do not have investors, so there is no public policy rationale for the dissemination of the stress test results. NASCUS further points out that credit unions can only build capital through retained earnings, which takes time. NASCUS worries that a covered credit union would be stigmatized by a "failed" stress test for some time, which might lead to a run by its members and endanger the National Credit Union Share Insurance Fund.

Interestingly, NASCUS letter makes the case for credit unions to be subject to a higher capital (net worth) requirement than banks. NASCUS states that unlike its bank counterpart, "a cover credit union has limited options available to it to build capital and restructure its balance sheet."

Disclosing Stress Testing Results

In a speech at the National Association of State Credit Union Supervisors’ annual State System Summit, National Credit Union Administration Board Chairman Debbie Matz announced the agency is drafting a proposed rule to require annual stress tests at credit unions with assets exceeding $10 billion.

There are currently four credit unions with at least $10 billion in assets with a fifth credit union nearing the threshold.

However, according to the NCUA press release, the agency has not made a decision about requiring the results of the stress test to be made public.

Section 165(i)(2) of the Dodd-Frank Act requires publication of a "summary" of the results of the stress tests for covered institutions. However, credit unions are not covered by this section of the Dodd-Frank Act, so there is not a legislative mandate to publicly disclose the results.

While Matz acknowledges public disclosure would enhance transparency to members, she is worried that the results can be misinterpreted and lead to inaccurate conclusions about a credit union’s financial health.

But are Chairman Matz's concerns about disclosure overblown?

Federal Reserve Chairman Bernanke in an April 8, 2013 speech noted the benefits of disclosure by stating "the disclosure of stress test results and assessments provides valuable information to market participants and the public, enhances transparency, and promotes market discipline."

Flexibility in Mortgage Disclosure Rule

A coalition of 12 trade groups sent joint letters last week to Reps. Steve Stivers (R-Ohio) and Ed Perlmutter (D-Colo.) thanking them for their help in urging the Consumer Financial Protection Bureau (CFPB) to adjust a provision in its proposed mortgage disclosure rules that could cause costly delays in closings.

The provision requires that borrowers receive their final closing disclosure three business days prior to closing, and that if a cost that the borrow must pay to close increases during that time, a new statement and waiting period must be initiated.

Because changes frequently occur in the three days prior to a closing, the three-day-restart provisions can reduce consumers’ ability to make changes to their purchase, put their mortgage rate lock at risk and even cause their purchase contract to expire, the trade groups explained.

Reps. Stivers and Perlmutter have asked fellow Representatives to cosign a letter to the CFPB urging more flexibility in the rule.

The letter is below (click on image to enlarge).

NCUA Goes Rogue

On April 30, 2013, NCUA denied my FOIA request for the Letter of Understanding and Agreement (LUA) between the agency and failed Telesis Community Credit Union from June 2010 and May 2011. The denial letter from NCUA is posted below (click on image to enlarge).

However, this FOIA denial shows how NCUA seems to flaunt the rule of law. The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 modified the Federal Credit Union Act requiring the disclosure of enforcement actions. But NCUA is using the FOIA exemptions to keep from releasing this information.

Section 206(s)(1) of the Federal Credit Union Act states the following:

(s) Public Disclosure of Agency Action.—
(1) In general.—The Board shall publish and make available to the public on a monthly basis—
(A) Any written agreement or other written statement for which a violation may be enforced by the Board, unless the Board, in its discretion, determines that publication would be contrary to the public interest;
(B) any final order issued with respect to any administrative enforcement proceeding initiated by the Board under this
section or any other law; and
(C) any modification to or termination of any order or agreement made public pursuant to this paragraph.

Paragraph (s)(5) of Section 206 states that the publication of the order can be delayed for a reasonable time under exceptional circumstances.

Delay of publication under exceptional circumstances.—If the Board makes a determination in writing that the publication of a final order pursuant to paragraph (1)(B) would seriously threaten the safety and soundness of an insured depository institution, the agency may delay the publication of the document for a reasonable time.

I can't see how releasing the two LUAs would constitute a serious threat to the safety and soundness of Telesis Community CU, because the credit union has already failed.

Moreover, this rogue agency rarely discloses any enforcement action in a reasonable time.

Profits Before People

Credit unions like to talk about how they put people ahead of profits; but a complaint before the South Dakota Supreme Court against Black Hills Federal Credit Union (Rapid City, SD) and CUNA Mutual Insurance Society (CUMIS) seeking class certification paints an entirely different picture.

The issue deals with credit disability insurance sold by Black Hills FCU to borrowers provided by CUMIS.

The complaint states that on July 1, 1999 Black Hills FCU unilaterally changed the terms of the policy by increasing what it charged for coverage with negligible increase in disability coverage. According to the complaint, the new coverage was 68% more expensive than the coverage that the insureds bought.

It alleges that CUMIS and Black Hills FCU consulted with each other before changing the terms and determined that the change would bring them significant financial benefit.

The complaint states the Black Hill FCU consulted with CUMIS on the placement of the "Notice to Members" so that the notice would not attract attention.

The "Notice to Members" of the change was buried inside the credit union's newsletter on the bottom of the fourth page. Information at the top of the page was in bold typeface and large font, "so that the reader’s eye and attention would be drawn to the bold typeface and large font, rather than to the “Notice to Members” at the bottom of the page."

The complaint stated that Black Hills FCU under the advice from CUMIS concealed:

• "The rate the members were paying before the increase;
• The percentage amount of the increase;
• The dollar amount of the increase over the life of the loan;
• The increased amount of interest that BHFCU would collect over the life of the loan as a result of the increased premium; and
• The insignificant benefit of the negligibly increased insurance coverage."

The complaint alleges that if the members "understood how much their premium was being increased, and how little increased benefit that they were providing with the premium increase," the members would have rejected the change.

The lawsuit accuses CUMIS and Black Hills FCU of breach of contract and unjust enrichment, along with other violations.

In addition, the South Dakota Division of Insurance had informed CUMIS that it had acted illegally because the newsletter notice did not comply with state requirements.

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.