Supreme Court refuses to hear ATM bank fee case
After nearly four years of litigation, Santa Monica has lost its battle with the banking industry.
The Supreme Court refused to hear on Tuesday an appeal by the cities of Santa Monica and San Francisco, which in 1999 passed identical ordinances that banned fees on ATM charges.
Santa Monica was the first city in California to take on the banking industry by banning what officials — and many consumers — regard as a “double charge.”
The high court’s ruling allows banks in Santa Monica to continue charging whatever amount they want in ATM fees to non customers.
Leland Chan, a lawyer for the California Bankers Association, called the cities’ argument bogus.
5B5,“The cities attempted to do what they believed to be a consumer protection ordinance,” he said. “Our position is simply the cities had no authority to regulate the pricing of national bank services.”
Withdrawal fees, made common in the mid-1990s, range from $1 to $3.50 per transaction for non-customers and are often accompanied by a separate fee charged by the customer’s bank.
City officials and consumer advocates explain it this way: Customers who use an ATM machine at a bank other than their own pay not only a $1.50 fee, but $2 more tacked on by their own bank. Then there’s a third fee that rarely is discussed publicly that’s called an “interchange fee.” That’s a fee customers don’t see because the banks privately charge each other for their customer’s withdrawals.
Councilman Kevin McKeown brought the issue to the forefront in October 1999 after he realized he was charged twice when he used ATM machines in San Francisco’s Chinatown.
He said Tuesday consumers are getting “nickled and dimed to death” by bank fees. And he said it’s unlikely that federal officials will do anything about it.
“That’s why we had to act locally,” McKeown said. “We’re not politicians that are supported by big banks or huge corporate donations, so we were willing to go for it.
“This is and always was a local consumer protection issue,” he added. “Santa Monicans are paying more than they should at ATMs, and we simply want (the banks) to do something about that.”
With a 4-3 vote, the Santa Monica City Council passed an ordinance that made it illegal for banks to charge the fee. But within two weeks of the law being enacted, a coalition of banks secured a federal injunction which banned the city’s controversial law.
In July of 2000, a U.S. District Judge in San Fransico struck down the bans after Bank of America, Wells Fargo and other California banks filed a lawsuit seeking their repeal.
Walker upheld the banks’ argument that federal law, which governs nationally chartered and federal savings banks, trumps any local restrictions. The banks say they are protected by the National Banking Act and the Home Owners Loan Act, which govern them.
In essence, Walker said those congressional acts prevent cities and towns from restricting the fees either by council vote or referendum.
The cities then appealed to the 9th U.S. Circuit Court of Appeals. But the panel of three judges also overturned the laws. The court of appeals also ruled that only the federal government, not city councils or local voters, may create such regulations.
The San Francisco-based appeals court ruled that federal banking regulations adopted by Congress allow banks to charge fees for ATM usage and Santa Monica and San Francisco voters had no authority over the issue.
City officials appealed the decision to the Supreme Court, where justices refused to hear the case and offered no comment.
Owen Martikan, of the San Francisco city attorney’s office, said he wasn’t surprised by the high court’s decision to not hear the case.
“We thought it was an issue that was at least important enough that they might consider it, but it’s always an uphill battle,” he said. “We felt Congress back in the mid-90s had made clear they intended state and local governments to regulate in consumers’ interest.... The courts concluded differently.”
Martikan said the cities’ only recourse is to lobby for federal legislation, which is unlikely. Instead, he recommended consumers educate themselves about how not to fall prey to excessive fees.
Officials in the Santa Monica city attorney’s office could not be reached for comment.
Adam Radinsky, the deputy city attorney handling the case, has said in the past that federal banking regulations do allow local governments or city voters to adopt such rules. He said Arkansas, Mississippi and Wyoming have rules limiting the amount of ATM fees banks may levee.
“I’m glad it’s over with and I wish and hope we can get back to normal now,” said Councilman Bob Holbrook. “I hate to say ‘I told you so,’ but I didn’t think (the ordinance) was legal when we imposed it.”
“I’m glad it’s over with and I wish and hope we can get back to normal now. I hate to say ‘I told you so,’ but I didn’t think (the ordinance) was legal when we imposed it.” — — BOB HOLBROOK Santa Monica City Councilman
(The Associated Press contributed to this report.)
- Councilman Bob Holbrook
Originally published in the Santa Monica Daily Press print edition on May 28, 2003. Read the original PDF.