- The Washington Times - Wednesday, July 11, 2012

Capitol Hill lawmakers are moving ahead with legislation that would prevent what critics say are frivolous lawsuits against banks, credit unions and stores that operate ATMs by exploiting a loophole in federal disclosure laws.

The House this week unanimously passed an amendment to the 1999 Electronic Fund Transfer Act to address the quirk in the law, and the Senate is expected to act on the proposal this week.

The law now requires ATM operators to post two notices about the fees customers will be charged for withdrawing cash. One notice is a digital message displayed on the screen before the transaction is made. The second notice is an actual sign, known as a placard, that is attached to the outside of the machine or nearby.

Lawmakers say the double warning is worse than redundant: Some customers are covertly removing the signs, then suing because the bank is “in violation” of the disclosure law. The growing scam has forced lawmakers to take another look at the law.

Rep. Blaine Luetkemeyer, Missouri Republican, sponsored the House bill after learning that banks in his own community were being cheated.

He called the scam “nonsense,” saying litigants are “taking advantage” of banks and causing “financial mayhem.”

“There’s no reason for a second disclosure when you already have it on the screen,” he said. “The absurdity of having to tell people twice is what we’re trying to get rid of here.”

This scam could force ATM operators to charge higher fees or removing the cash machines altogether to minimize more losses from fraud, said House Financial Services Committee Chairman Spencer Bachus, Alabama Republican.

But cutting back on disclosure is not the answer, said Linda Sherry, spokeswoman for Consumer Action, which along with Consumers Union and U.S. PIRG sent letters to Congress opposing the change.

“Certainly, we don’t need to do away with consumer disclosure,” she said. “We need to improve consumer disclosure.”

Ms. Sherry said current disclosure rules are insufficient, noting that consumers are only told of the fee the ATM operator is charging them, but not the “foreign bank fee,” which their own bank might also charge.

She said her group would favor the Consumer Financial Protection Bureau coming up with a rule to address the double-disclosure requirement, rather than legislation.

“There have been some lawsuits that are not as advisable as we would have hoped,” she said. “That’s unfortunate. It’s disheartening.”

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2020 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide