Compliance Bulletin

Federal Court Rules On ATM Fee Notice Standard
August 13, 2012

A federal district court in Minnesota found a bank liable for violating the Electronic Funds Transfer Act (EFTA) by failing to satisfy the “prominent and conspicuous” requirement for the display of the required physical ATM fee notice. In Brown v. Wells Fargo Bank, a non-customer of the bank used the bank’s ATMs and was charged foreign interchange fees in each instance.

While he admitted that he was aware of the fees through the electronic notice before he completed the transactions, he claimed that the physical notices on the ATMs were not prominent and conspicuous.

Brown then sued the bank, moved to certify a class action, and on a motion for summary judgment the court held that the notice was deficient as a matter of law. A motion for summary judgment is normally granted if there are no triable issues of fact and the moving party has demonstrated that it is entitled to judgment as a matter of law. The decision is troubling because neither the EFTA nor Federal Reserve Board regulation promulgated under the EFTA at 12 CFR Part 205 (Regulation E) provides guidance on the standard. Whether a notice is posted in a prominent and conspicuous location would seem to be a classical question of fact. Moreover, as will be discussed below, the Court articulated factors that are arguably irrelevant to the inquiry (such as font style spacing and color) as the standard as written address only the location of the notice.

While the decision arises in the 8th federal circuit (California and several of the western states are in the 9th), the decision nevertheless offers a perspective to how one judicial authority interprets the prominent and conspicuous location standard. In the absence of direct guidance, the Court looked to what it deemed to be comparable standards as used by Congress in the Truth in Lending Act (TILA) and the Fair Credit Reporting Act (FCRA). In analyzing these statutes, courts have referred to a definition from the Uniform Commercial Code which defines a term as conspicuous when it is “so written, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it.” This standard tests whether an average consumer would be confused by the disclosures that were made.

According to the District Court, the relevant factors as to the ATM notice are its location, the type size used, and whether the notice is set off in some way such as by font style spacing or the use of capital letters. Here, in each instance, the notice is not in capital letters and the type and background of the notice are in a coordinating rather than contrasting color. By comparison, other signs and buttons on the ATMs are in contrasting colors or are set off by a white or black background. The notice is placed inside the hood protecting the screen while the type of cards accepted is indicated in color on a sign on top of the machine and is back lit. Because the notice dioes not stand out relative to other information on or near the ATM, it iss unlikely a consumer would see the notice before initiating the transaction, which is the purpose of the notice.

Based on these findings, the Court found that a reasonable person could not conclude from the evidence that the notice was prominent and conspicuous. In other words, the notice did not comply with the EFTA as a matter of law.

More positively, the Court denied plaintiff’s claim of unjust enrichment on his own behalf and others who are similarly situated. This claim requires a showing that one party benefitted from another party through the use of illegal or unlawful means. The Court noted that other courts have found that an ATM user’s explicit agreement to continue the transaction and accept a fee after the appearance of an on-screen notice is sufficient to form a contract. Because a valid contract was formed between Brown and the bank, his unjust enrichment claim has no merit. The Court also denied Brown’s motion to certify a class action.

As noted above, this is not a California or 9th circuit decision, but it is one that articulates the proposition that the ATM notice must in some way stand out compared to other signs and notices on the machine in order to satisfy the EFTA. Normally a court in California, whether state or federal, looks primarily to decisions in California or within the circuit, respectively, as precedents. Since to our knowledge the EFTA prominent and conspicuous ATM notice standard has not been addressed in California, the plaintiffs bar may find a friend in the Brown decision. This is a link to the decision, which includes photographs of the subject ATMs.

The information contained in this CBA Regulatory Compliance Bulletin is not intended to constitute, and should not be received as, legal advice. Please consult with your counsel for more detailed information applicable to your institution.

© This CBA Regulatory Compliance Bulletin is copyrighted by the California Bankers Association, and may not be reproduced or distributed without the prior written consent of CBA.

 

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