> ## Content Index > Fetch the complete content index at: https://www.smdp.com/llms.txt > Use this file to discover other available public pages before exploring further. # Appeals court battle over ban on ATM fees gears up - URL: https://www.smdp.com/appeals-court-battle-over-ban-on-atm-fees-gears-up/ - Published: 2002-02-05T16:00:00.000Z - Updated: 2026-10-23T00:00:12.000Z - Author: Guest Author - Tags: Crime, Santa Monica, #archive-import *Federal government backs banks in ATM fee battle* *By DAVE DANFORTH Daily Press staff writer* While Santa Monica’s battle to ban ATM fees intensifies, the court file continues to grow. When big banks attacked Santa Monica’s bid to stop them from double-charging customers who use ATM machines, what followed was a battle over obscure laws and fine print. But you’d never know it from the reams of briefs appearing before federal judges. The legal niceties are buried in an avalanche of economic arguments about unfair competition, free choice and bank consolidation. The new arguments, appearing in law briefs from groups claiming an interest in the ATM fee case, focus less on legal argument and more on simple persuasion. Now in the hands of a U.S. Appeals court in San Francisco, a judge will determine if ATM fees are predatory pricing or a money grab bag for banks. Lawyers for Santa Monica and San Francisco — both cities that attempted to ban ATM fees — presented oral arguments in the case last month. It’s unknown when the circuit court will rule on the appeal. The national battle began in April 1996, when two large banking networks cleared the way for surcharges by lifting restrictions they had previously imposed. Banks were charging customers $2 as a “foreign fee” to use another bank’s machine. Then came the “surcharge” — another $1.50 fee, tacked on directly by the “foreign” bank owning the ATM. It was widely scorned as a money grab by banks but the banks claimed they actually lost money — $8,000 on average — on each ATM. Consumer advocates and some state attorney generals scoffed at the notion, claiming that banks were profiting handsomely by firing tellers while customers turned to ATMs for cash. Both Santa Monica and San Francisco are dominated by Bank of America and Wells Fargo, with a market share of 72 percent in San Francisco and 86 percent in Santa Monica, according to the Santa Monica city attorney. In October of 1999, the Santa Monica City Council, dubbed by some as the ruling authority in a “people’s republic,” prohibited banks from charging ATM fees. Three weeks later, San Francisco voters followed suit. The day after the San Francisco vote, the banks sued Joined by the California Bankers Association, banks won a federal judge’s order a few days later temporarily setting aside the ban. By July of 2000, U.S. District Judge Vaughn Walker in San Francisco ruled the ban was “preempted” by the Congressional National Bank Act, a law passed in 1863 that allows banks to charge whatever they want as part of normal business practice. Proponents of the ban said the combined $3.50 fee amounted to 17.5 percent for a $20 cash withdrawal. Banks claim the bans are impermissible because they are allowed under federal charters to charge whatever fees they want. When federal judges recently heard arguments in appeal, they heard attorneys general from California, Nevada and Minnesota, as well as the California Public interest Research Group and consumer groups arguing for the ban. The banks enlisted big business groups. But the most strident arguments against the ban came from the Pacific Legal Foundation, which weighed in for free enterprise, indexing one of its arguments as “There’s no free lunch.” Where the cities claimed the surcharges were aiding big banks by forcing customers to switch to them and avoid fees, Pacific Legal Foundation said the real story was entirely different. It argued that small banks that can’t afford ATMs, don’t deserve to survive, and if customers don’t like the ATM fees, they could switch to the “cash back” feature of debit cards. Banks get big backing Lurking behind the economic arguments is the Office of the Comptroller of the Currency, the division of the Treasury Department that not only regulates nationally-chartered banks, but also fights off consumer activists that want to protect customers from predatory activities like paycheck lending with 300 percent interest rates. The OCC is maintaining a “political agenda,” noted consumer groups, arguing that the OCC competes to persuade banks to become chartered by it, rather than by the states. The OCC has issued several opinions in banking law that gives Congress the sole authority to regulate banks and fees. States and consumer groups say that’s not true; that parallel banking laws have specifically invited regulators to come in with stricter consumer protections on banks. The banking industry scoffs at cities like Santa Monica and San Francisco for attempting to “re-structure competition in the banking industry.” > “re-structure competition in the banking industry.” — The banking industry scoffs at cities like Santa Monica and San Francisco for attempting to The cities, however, are taking aim at the OCC, urging the judges to “remind the agency of its duty to uphold, rather than find ways for banks to avoid the law.” And the Pacific Legal Foundation claims the ban amounts to “government-imposed wealth distribution” and that $3.50 is a small price to pay for the ability to get a machine to deliver up to $300 in cash on demand at 3 a.m. in spots as obscure as Kazakhstan. On one Pacific Legal Foundation claim both sides are likely to agree: Consumers, it says, are “neither lazy, nor stupid, nor helpless.” While the argument backs the notion that they can avoid ATM fees if they try hard enough, in Santa Monica and San Francisco, customers chose to illustrate those traits by passing the ban. *Originally published in the Santa Monica Daily Press print edition on February 5, 2002.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/020502.pdf?ref=smdp.com)