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District Court grants $11.9 million settlement in ATM fees suit
In December, the U.S. District Court for the District of New Jersey granted preliminary approval of a $11.9 million settlement in a class action suit resolving allegations pertaining to a defendant national bank’s out-of-network ATM fees. According to the plaintiff’s motion, the plaintiffs challenged a fee assessed by the defendant “when its accountholders check their account balance at a [an out-of-network] ATM, referred to herein as an ‘Out of Network ATM Balance Inquiry Fee’ or ‘OON ATM Balance Inquiry Fee.’” The plaintiffs alleged that such fees on balance inquiries, when combined with fees assessed by the bank and by the out-of-network ATM owner, resulted in three total fees on a single cash withdrawal at an out of network ATM, and violated the terms of the defendant’s account agreement.
On July 19, 2023 the court granted final approval to the settlement.
FinCEN issues statement on independent ATM customer due diligence
On June 22, FinCEN issued a statement providing clarity to banks on the application of a risk-based approach to conducting customer due diligence (CDD) on independent Automated Teller Machine (ATM) owners or operators, consistent with FinCEN’s 2016 CDD Rule. As previously covered by InfoBytes, FinCEN issued a final rule imposing standardized CDD requirements for banks, broker-dealers, mutual funds, futures commission’s merchants, and brokers in commodities in May 2016. The rule established that covered institutions must identify any natural person that owns, directly or indirectly, 25 percent or more of a legal entity customer or that exercises control over the entity. The rule also established ongoing monitoring for reporting suspicious transactions and, on a risk basis, updating customer information. The recently released statement explained that the level of money laundering and terrorism financing risk varies with these customers, and that they do not automatically present a higher level of risk. FinCEN pointed to certain customer information that may be useful for banks in making determinations on the risk profile of independent ATM owner or operator customers, including, among other things: (i) organizational structure and management; (ii) operating policies, procedures, and internal controls; (iii) currency servicing arrangements; (iv) source of funds if a bank account is not used to replenish the ATM; and (v) description of expected and actual ATM activity levels.
District Court dismisses bank from class action on out-of-network ATM fees
On April 4, the U.S. District Court for the Southern District of California granted a defendant bank’s motion for summary judgment and denied class certification in an action concerning out-of-network fees charged on purportedly invalid balance inquiries performed at out-of-network (OON) ATM machines. The defendant is a member of two cardholder networks, which permit account holders to access and use OON ATMs. In 2019, plaintiff account holders filed a lawsuit alleging the defendant violated several California state consumer protection laws and breached its deposit account agreements by systematically charging excessive fees. Plaintiffs further alleged the defendant assessed multiple fees if a consumer made a balance inquiry at the same time as a cash withdrawal. The defendant argued in its motion for summary judgment that the deposit agreement was unambiguous and that its assessment of the OON fees for balance inquiries is permitted under the agreement’s express terms. In agreeing with the defendant that no ambiguity existed in the language in the agreement regarding such fees, the court, among other things, also held that language in the agreement providing the defendant and ATM operators discretion to charge or waive fees for use of OON ATMs did not imply that the defendant relied on that contract term in bad faith. The court found that nothing about the use of the word “may” in the phrase “[w]e may also charge you a fee,” necessitates “the conclusion that the bank ‘abuses its power and takes advantage of contractual uncertainty by charging OON Fees when it knows, or should know, of the [alleged] systematic deception occurring at [OON] ATMs resulting in invalid balance inquiries.’”
In its motion, the defendant bank also maintained that the claims against it fail because the plaintiffs failed to follow express reporting and pre-dispute notification procedures outlined in their agreements, which require account holders to review their statements and notify the bank within 60 days of any problems or unauthorized transactions. The court declined to find that the pre-dispute procedures provided an alternative basis for summary judgment in favor of the defendant, finding that it was not clear that plaintiffs’ obligation to provide defendant with notice of unauthorized transactions covered disputed OON ATM fees. The court explained that such fees may not be apparent on the plaintiffs’ billing statements and that “the notice provisions seem to relate to major issues such as fraud and unauthorized or stolen checks” rather than problematic fees.
Bank reaches $5.2 million settlement in ATM fee class action
On February 3, consolidated class members filed an unopposed motion for preliminary approval of a settlement agreement in the U.S. District Court for the Southern District of Ohio to resolve allegations that a national bank breached its account agreement by assessing balance inquiry fees in certain circumstances. Class members, comprised of current and former account holders, claimed that the bank assessed fees if account holders used an ATM outside of the bank’s network (non-bank ATM) to check their balances. The class also alleged that the bank assessed multiple fees if a balance inquiry was undertaken “during the same ATM visit as a cash withdrawal or other funds transfer.” As a result of the action, the bank modified its account disclosures to “better inform its customers that they could be charged a fee for a balance inquiry” at a non-bank ATM. The preliminary settlement seeks to certify class members who were assessed the contested fees from January 1, 2010 through October 31, 2018 and will not require class members to file claims to receive the settlement’s benefits. Under the preliminary settlement terms, the bank will pay $5.2 million into a common fund, and has agreed to analyze its historical transaction data to identify settlement class members and automatically credit settlement proceeds into their accounts via direct deposit.
District court approves $13 million settlement in ATM fee class action
On January 21, the U.S. District Court for the Southern District of California granted final approval of a $13 million class action out-of-network (OON) ATM fee settlement. As previously covered by InfoBytes, the plaintiffs filed the action asserting that the bank charges its customers two OON fees when an account holder conducts a balance inquiry and then obtains a cash withdrawal at an OON ATM. The bank moved for summary judgment on the breach of contract claim, which the district court denied, concluding that there were ambiguities regarding the fee terms provided in the contract and on the on-screen ATM warnings. After participating in a private mediation, the plaintiffs filed an unopposed motion for preliminary approval of the settlement. The $13 million settlement covers a total of over 1.6 million class members—defined as all bank account holders in the U.S. who incurred at least one OON balance inquiry fee during varying time periods based on location— and provides for a $10,000 incentive award to each of the named plaintiffs and $3.9 million for plaintiffs’ counsel. In exchange for their share of the settlement funds, the class members will agree to release the bank from all claims relating to the action.
District court allows some claims to proceed in ATM-fee action
On September 28, the U.S. District Court for the Southern District of California allowed fraud claims under California’s Unfair Competition Law (UCL) and breach of contract claims to proceed against a national bank and several independent ATM operators (collectively, “defendants”) in a putative class action alleging that the defendants (i) charged unwarranted fees for using out-of-network (OON) ATMs for balance inquiries; (ii) made deceptive and misleading representations on screens and on signs regarding those fees; and (iii) assessed fees in violation of governing account documents. As previously covered by InfoBytes, the class action alleged 13 claims against the defendants for violations of, among other things, the UCL, and claims for conversion, negligence, and breach of contract. In March, the court dismissed all 13 claims but allowed the plaintiffs leave to amend a number of them. After the plaintiffs filed their amended complaint, the defendants subsequently submitted four new motions to dismiss.
The court denied dismissal of the UCL claims against all ATM operators, concluding that the plaintiffs sufficiently alleged claims under the fraud prong. Specifically, the court noted that the plaintiffs provided details with enough particularity, such as the date and location and examples of the specific screen prompts, which established that the ATM operators “employed a misleading series of screen prompts at the ATM machines to trick Plaintiffs, and other accountholders, into engaging in OON balance inquiries.” However, the court dismissed all the unjust enrichment claims and one plaintiff’s breach of contract claim against the national bank, concluding, among other things, that the dispute between the plaintiffs and national bank is covered by a “valid and enforceable written agreement,” which precludes the assertion of unjust enrichment. Moreover, the court allowed two plaintiffs’ breach of contract claims to proceed against the national bank, determining that “[b]oth parties have set forth reasonable, opposing interpretations of the [account agreement],” and the plaintiffs’ definition of “balance inquiry” under the agreement is at least plausible. Thus, the court denied dismissal as to those claims.
Colorado Banking and Financial Services commissioners provide guidance on Safer at Home orders
On May 15, the Colorado Banking and Financial Services commissioners provided additional guidance on the Safer at Home orders. The commissioners continue to encourage Colorado state-chartered financial institutions to work with affected borrowers and customers, and provide payment relief to consumers impacted by Covid-19. For example, financial institutions are encouraged to waive fees for services (e.g., overdraft fees, ATM fees) and provide accommodations such as eliminating minimum balance requirements on accounts and increasing daily withdrawal limits on ATMs.
Michigan regulator encourages financial institutions to avoid offsetting CARES Act stimulus payments
On May 14, the Michigan Department of Insurance and Financial Services issued a bulletin “strongly” urging Michigan financial institutions not to access CARES Act stimulus payments to satisfy overdrafts or to exercise any right of offset against the funds without the agreement of the customer or member. The regulator also “strongly” urged financial institutions not to use CARES Act stimulus payments for ATM, late payment, overdraft, or other fees.
Arizona Department of Financial Institutions issues guidance to financial institutions working with customers affected by Covid-19
On April 24, the Arizona Department of Financial Institution issued a statement to financial institutions working with customers affected by Covid-19. Financial institutions are encouraged to work with affected customers and communities including through, among other things, waiving certain fees, increasing ATM cash withdrawal limits, offering payment accommodations, and suspending actions to foreclose on homes and businesses. Prudent efforts to modify the terms on existing loans for affected customers will not be subject to department criticism. The statement also provides guidance on financial condition review, supervisory response and regulatory relief, regulatory reporting requirements, and alternative service options for customers.
6th Circuit affirms access-device fraud and identity theft convictions
On April 17, the U.S. Court of Appeals for the Sixth Circuit affirmed a district court’s access-device fraud and aggravated identity theft convictions, finding that there was sufficient evidence to support the court’s factual findings on both charges. According to the opinion, the defendant applied for a debit card for his great-grandfather’s bank account without authorization and used the card to pay for his own expenses. The defendant was also seen multiple times on bank security cameras withdrawing money from an ATM using this card. The district court also heard testimony that the defendant opened accounts and applied for loans under his own name but used his great-grandfather’s social security number. The district convicted the defendant on one count of access-device fraud and two counts of aggravated identity theft. The defendant appealed, arguing that the district court failed to make adequate findings of fact and that the government failed to present sufficient evidence to support the charges for which he was convicted.
On appeal, the 6th Circuit reviewed the factual findings underlying the convictions, and first concluded that, with respect to the count of access-device fraud, the government proved each element: that the defendant (i) knowingly used an access device assigned to another individual; (ii) possessed an intent to defraud; (iii) obtained a thing or things with an aggregate value of $1,000 or more within a year using the access device; and (iv) affected interstate or foreign commerce in using the access device. The appellate court explained that there was ample circumstantial evidence to support lack of authorization from the proper owners of the accounts at issue, and that the card was issued in Kentucky and the bank issuing the card was headquartered in Minnesota. The appellate court next considered whether evidence supported the district court’s finding that the defendant committed aggravated identity theft under the bank-fraud statute by opening a checking account and applying for a loan using his great-grandfather’s social security number. The appellate court held that the defendant’s use of his great-grandfather’s social security number properly supported the district court’s finding that the defendant knowingly used, without lawful authority, another person’s means of identification and that the defendant committed a predicate felony under the bank-fraud statute.