Noting urgency in the matter, CUNA has urged the federal Consumer Financial Protection Bureau (CFPB) to suspend a duplicative automated teller machine (ATM) notice requirement which is being used by some as the basis for lawsuits against credit unions and other financials.

In the letter to the CFPB, CUNA President and CEO Bill Cheney stated that legal challenges are arising because ATM notices required under Regulation E have been removed, damaged or destroyed without the institution's knowledge.

Under federal rules, Cheney wrote, ATMs are required to display a notice that a fee may or will be charged. He added that the ATM screen (or paper disclosure) is required to provide detailed disclosures prior to the payment of the fee.

However, Cheney pointed out that that outside notices on ATMs are, in some cases, being intentionally removed, destroyed or damaged and that pictures are then taken of the ATM to show noncompliance. The pictures are then used by those bringing lawsuits as proof that the credit union is out of compliance – even though the screen or paper disclosure is still being displayed.

“If the litigants were concerned about compliance, they should first bring the issue to the institution's attention to correct it or to the attention of the regulator,” Cheney wrote. “That is not happening and ATM "chasers" are going straight to court.”

Under current rules, plaintiffs may be awarded damages to as well as attorney fees if they prevail in the lawsuits, Cheney pointed out.

To address the growing problem of lawsuits, Cheney urged Acting CFPB Director Raj Date to use the agency’s power to revise Reg E to no longer mandate the duplicate notices of screen/paper and those attached to the outside of the ATM itself.

“We urge the agency to undertake a quick review of this and suspend the duplicative ATM notice requirement, which the agency is authorized to do under the EFT Act,” Cheney wrote. “If you feel that is not possible at this time, at the very least, the CFPB should announce it will work with us and others, including consumer groups, to seek legislation immediately that will put an end to these suits.”

The complete text of CUNA’s letter to the CFPB follows:

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December 21, 2011
 
Mr. Raj Date
Acting Director
Consumer Financial Protection Bureau
1500 Pennsylvania Avenue, NW
(Attn: 1801 L St.)
Washington DC 20220

Dear Acting Director Date:

On behalf of the Credit Union National Association, I am writing to you regarding a matter of some urgency to a number of credit unions -- the increasing number of lawsuits being filed because automated teller machine (ATM) notices required under Regulation E have been removed, damaged or destroyed without the institution's knowledge. CUNA is the largest advocacy organization for credit unions, representing about 90% of the nation's approximately 7,300 state and federal credit unions, which serve 93 million consumers and small businesses.  

We have raised this issue with your staff and others, and were pleased to see it referenced in the agency’s request for information regarding streamlining regulations. However, a new round of these suits has been brought this week, and it is time to take action that will remove any basis for such legal challenges that have questionable motivations. Credit unions work hard to meet regulatory requirements, even in today's environment of overly burdensome rules, and want to ensure they are in compliance, including with requirements pertaining to ATM notice and disclosures. Credit unions, like some banks, participate with others in offering ATM access to their members, and a credit union is often not the actual custodian of the ATM.
 
Under Section 205.16 of Regulation E, which implements the Electronic Fund Transfer Act, ATMs are required to display a notice that a fee may or will be charged. Also, the ATM screen (or paper disclosure) is required to provide detailed disclosures prior to the payment of the fee. It would seem that outside notices on ATMs are, in some cases, being intentionally removed, destroyed or damaged and that pictures are then taken of the ATM to show noncompliance. If the litigants were concerned about compliance, they should first bring the issue to the institution's attention to correct it or to the attention of the regulator. That is not happening and ATM "chasers" are going straight to court.
 
What is even more frustrating about these suits is that the notices on the ATM duplicate information provided on the screen of every ATM.

Consumers do not benefit from the redundant notices, yet credit unions are being sued because the notices have been removed. Further, the EFT Act provides that damages to plaintiffs may be awarded as well as attorney fees.

Under Section 904(c) of the EFT Act, the CFPB could revise Regulation E requirements to no longer mandate these duplicate notices. The language of that section provides:
 
(c) Regulations prescribed hereunder may contain such classifications, differentiations, or other provisions, and may provide for such adjustments and exceptions for any class of electronic fund transfers, as in the judgment of the Board are necessary or proper to effectuate the purposes of this title, to prevent circumvention or evasion thereof, or to facilitate compliance therewith. The Board shall by regulation modify the requirements imposed by this title on small financial institutions if the Board determines that such modifications are necessary to alleviate any undue compliance burden on small financial institutions and such modifications are consistent with the purpose and objective of this title.
 
We urge the agency to undertake a quick review of this and suspend the duplicative ATM notice requirement, which the agency is authorized to do under the EFT Act. If you feel that is not possible at this time, at the very least, the CFPB should announce it will work with us and others, including consumer groups, to seek legislation immediately that will put an end to these suits.
 
CUNA urges the agency to make this matter a priority and to take action to stop this needless litigation that diverts credit unions and their resources from serving their members, who own their credit union and ultimately bear the cost of such litigation. We would welcome the opportunity to talk with you further about this concern. In the meantime, if you have questions about our letter or would like additional information, please feel free to contact Mary Dunn, CUNA's Deputy General Counsel, at 202-508-6736 , or me at 202-508-6745.
 
Thank you for your attention to this important issue.
 
Best regards,
Bill Cheney
President & CEO
Credit Union Natl. Assn. (CUNA)
Washington, DC

Cc: Senate Banking Committee Chairman Tim Johnson
    House Financial Services Committee Chairman Spencer Bachus
    Mr. Richard Cordray, Enforcement, CFPB
    Mr. Steve Antonakes, Supervision, CFPB
    Ms. Elizabeth Vale, External Affairs, CFPB
    Mr. Leonard Chanin, Regulations, CFPB