CUNA Comment Letter
Proposed Revision of Regulation E - Disclosure of ATM Fees
August 18, 2000
Ms. Jennifer J. Johnson
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, D.C. 20551
RE: Docket No. R-1077, Electronic Fund Transfers Proposed Rule Disclosure of ATM Fees
Dear Ms. Johnson:
The Credit Union National Association (CUNA) appreciates this opportunity to comment on behalf of its members on the notice Electronic Fund Transfers Disclosure of ATM Fees--. As a national trade association, CUNA represents more than 90 percent of the nations over 10,500 state and federal credit unions and solicits the opinions of these credit unions on relevant matters. The following comments were developed by CUNA with input from credit unions and our Subcommittee on Payment Systems, led by Mr. Stan Hollen, President and CEO of The Golden 1 Credit Union in Sacramento, California. This subcommittee includes officials of credit unions from around the country which provide financial services, including EFT services, to their credit union members.
CUNA believes that it is appropriate for the Federal Reserve Board, pursuant to its authority under section 904(a) of the Electronic Fund Transfer Act (EFTA), to revise Regulation E in order to implement the amendments in the EFTA that were enacted as part of the Gramm-Leach-Bliley Act. This new Regulation E section on ATM fee disclosure would make it easier for credit unions to locate and comply with the disclosure requirements.
I. DISCLOSURES AT AUTOMATIC TELLER MACHINES
Under the proposed Regulation E revision, an ATM operator will be required to provide notice informing the consumer that a fee will be charged and the amount of the fee prior to imposing a fee on a consumer who holds an account at another financial institution. The fees must be included in a notice that is located in a prominent and conspicuous-- location on or at the ATM. In addition, this notice must appear on the ATM or on a paper receipt, either of which must be provided before the consumer is committed to completing the transaction.
CUNA supports these ATM disclosure provisions. The disclosure of applicable fees benefits consumers by allowing them to know the full charges before going through with an ATM transaction. Further, we are not aware that these requirements would impose a significant additional burden on the operations of credit unions. The majority of credit unions are already required by state law and/or their ATM network operators to post any surcharges imposed by the ATM operator and to give the consumer an opportunity to cancel the transaction before the fee can be imposed. Some credit unions presently do not disclose the fact that a fee may be charged for a balance inquiry and the amount of the fee. However, compliance with this provision in terms of ATM programming and posting costs would likely constitute only a minor expense for credit unions. CUNA encourages the Board to state in the Supplementary Information that notification to existing customers would not require a new disclosure to be mailed. CUNA believes that appropriate notification in a newsletter or statement stuffer sent to all customers should constitute adequate notice of this requirement.
Proposed Section 205.16(c)(2) requires that a consumer be given notice that an ATM operator will impose a fee for a transaction before the consumer is irrevocably committed to completing the transaction.-- CUNA feels it would be more appropriate to require the notice before the consumer is irrevocably committed to paying a fee.--
II. INITIAL DISCLOSURES
CUNA also supports the Regulation E amendment requiring the financial institution holding the consumers account to include information about these fees at the time the consumer contracts for an EFT service or before the first transfer is made to or from the account. The proposed rule would require that these initial disclosures include a notice that a fee may be imposed by: (1) an ATM operator not holding the consumers account and (2) any national, regional, or local network used to complete the transaction. If a financial institutions disclosures do not currently include such a provision, it may comply with this requirement by including an insert that describes these ATM fees.
In the initial disclosures for ATM cards, credit cards, and check cards, the majority of credit unions providing such devices already advise members that if they use an ATM not operated by their own credit union, they could incur extra fees. Many such credit unions also already advise members that if they use their ATM or check cards at ATMs not owned by their own credit union, then they will be charged fees to offset the fees the credit union must pay to the networks.
Section 205.7(b)(11) of the proposed revision states that notice of an ATM surcharge should be provided when the consumer initiates an electronic fund transfer or makes a balance inquiry at an automated teller machine operated by a non- accountholding financial institution, and by any network used to complete the transaction.-- CUNA believes that this section of the proposed rule incorrectly classifies a network fee as a surcharge. A July 2000 report by the General Accounting Office (GAO) entitled Automated Teller Machines: Issues related to Real-time Fee Disclosure-- describes a surcharge as a fee paid to the ATM owner by the cardholder using cards not issued by the ATM owner--. This description excludes fees imposed by networks, or network fees--. Further, the classification of a network fee as a surcharge erroneously implies that a network may impose a fee on a consumer. The GAO report does not describe a network fee or any situation in which a network would impose a fee on a consumer. Typically, a network charges a fee to a card issuer (or account holding institution) when the card issuers customer uses a non-proprietary ATM. To offset the cost of this fee, a card issuer may impose a fee on its customer.
Normally, when a card issuer passes along network processing fees, these fees are already disclosed to the cardholder at the time of issue in accordance with Regulation E. Given the numerous pricing and fee structures involved in the EFT environment, requiring financial institutions to disclose fees imposed by a national, regional, or local network would only confuse the consumer, which runs counter to the intent of the disclosure. There would be uncertainty as to whether changes in fees charged by a network (many times not within the control of credit unions) would trigger a requirement for a new disclosure. From a processing standpoint, a network cannot charge the consumer a fee without permission of the ATM owner. Therefore, imposing the disclosure on fees charged by the ATM owner only seems adequate. For the above reasons, CUNA recommends this section of the proposed rule and its corresponding model clause be revised to exclude the language that references network fees--. It would better serve the consumer to have language stating, When you use an ATM not owned by us, you may be charged a fee by the ATM operator above any fees you may already be charged by your financial institution for processing an EFT transaction (including a fee for a balance inquiry).-- However, if the Board feels it is necessary to include language in the initial disclosure relating to the disclosure of fees that may be charged by a network, CUNA believes that the language should simply refer to any network-- as opposed to specifying national, regional, or local network.
In closing, CUNA supports the ATM disclosure amendments to Regulation E with the suggested language changes as discussed above. If you have any questions, please contact Mary Dunn or Catherine Orr at (202) 682-4200.
Mary Mitchell Dunn
Associate General Counsel
Catherine A. Orr
Regulatory Advocacy Attorney