U.S. Supreme Court could choose to hear ATM fee fight
Santa Monica and San Francisco are taking their fight to ban ATM fees to the United States Supreme Court.
An appeal will be filed within the next month formally asking the U.S. Supreme Court to decide if local cities and states have the right to set banking regulations that protect consumers, according to attorneys for Santa Monica and San Francisco.
“We remain confident that our position will be vindicated,” said Adam Radinsky, Santa Monica deputy attorney. “States have the rights to protect their consumers.
Both cities adopted laws in 1999 banning banks from charging ATM fees to customers without accounts at that bank. But those laws were overturned in October 2002 by the 9th U.S. Circuit Court of Appeals, the highest ranking federal court in California.
That decision put the appeals court in direct conflict with the California Supreme Court, which ruled that the state legislature and local cities have the power to regulate “outrageous” and “unfair” fees charged by out-of-state banks.
The discrepancy between the two highest courts in the state may make the appeal attractive to the U.S. Supreme Court, according to attorneys for Santa Monica and San Francisco.
“This is an important issue of federal versus state control of banking that affects not just these two cities but any city in any state in the country that tries to regulate banking in any way,” said Owen Martikan, a San Francisco deputy attorney. “For that reason alone, it’s something the Supreme Court hasn’t spoken to in any way.”
“Federal regulators have been doing the bidding of banks for years and it’s been left to local cities and states to regulate them.”
“double charge.” — Santa Monica was the first city in California to take on the banking industry by banning what officials — and many consumers — regard as a
“Federal regulators have been doing the bidding of banks for years and it’s been left to local cities and states to regulate them.” — — ADAM RADINSKY Santa Monica deputy city attorney
A panel of three judges on the 9th U.S. Circuit Court of Appeals overturned the laws on Oct. 25, 2002 and the cities lost an appeal two months later. The court of appeals, in upholding an earlier judge’s ruling, said 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. That being the case, the Santa Monica City Council and San Francisco voters had no authority to approve identical laws in 1999 banning a bank from charging an ATM fee to a customer without an account at that bank.
Banks in Santa Monica were forced to drop the extra fees for a couple of weeks directly after the ban went into effect in 1999. Later, Wells Fargo and Bank of America — the state’s two largest banks — filed the suit in San Francisco.
The original hearing convinced a judge to force the banks to put ATM fees collected into escrow for possible return to customers until the issue is decided in court. That account has grown to well over $1 million.
Banks say they need the surcharges to expand their ATM networks. Consumer organizations backing the bans say the fees merely pad bank profits.
City 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. It irked him enough to bring the issue to the city council, where the ban passed 4- 3. The council indicated that banks who allow customers to be charged twice are ripping them off.
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.
“Bank fees are proliferating and growing at such an alarming rate and — because ATM surcharges are a relatively new thing — a surprisingly few people are unaware they are paying it,” Radinsky said.
“It’s definitely an issue that struck a nerve with the public when the law was passed,” he said. “Consumers were outraged to find out they were paying two different fees for exactly the same thing.”
Originally published in the Santa Monica Daily Press print edition on February 19, 2003. Read the original PDF.