CUNA Regulatory Comment Call


July 17, 2000

Regulation E Proposal Will Require Disclosure of ATM Fees

(MAJOR RULE)

EXECUTIVE SUMMARY

Comments on the proposal are due by August 18, 2000. Please submit your comments to CUNA by August 14, 2000. Please feel free to fax your responses to CUNA at 202-371-8240; e-mail them to Associate General Counsel Mary Dunn at mdunn@cuna.com or to Assistant General Counsel Jeffrey Bloch at jbloch@cuna.com; or mail them to Mary or Jeff in c/o CUNA's Regulatory Advocacy Department, 805 15th Street, NW, Suite 300, Washington, DC 20005. If commenting directly to the Fed, you must refer to Docket No. R-1077. You may also contact us if you would like a copy of the proposed rule or you may access it on the Internet at the following address: http://www.federalreserve.gov/boarddocs/press/boardacts/2000/20000707/attachment.pdf

BACKGROUND

The Gramm-Leach-Bliley Act includes amendments to the Electronic Fund Transfer (EFT) Act. These amendments require the disclosure of ATM fees that are imposed by ATM operators on consumers who hold accounts at other financial institutions. The amendments also require the financial institution holding the consumer's account to include information about these fees in the initial disclosures that are already required when consumers contract for EFT services.

Regulation E implements the EFT Act and covers transactions initiated through an ATM, point of sale terminal, telephone bill-payment program, automated clearing house, or home banking program. The proposed rule revises Regulation E to incorporate the amendments in the EFT Act that were enacted as part of the Gramm-Leach-Bliley Act.

DESCRIPTION OF THE PROPOSED RULE

Before imposing a fee on a consumer who holds an account at another financial institutions, an ATM operator will be required to provide notice that informs the consumer that a fee will be charged and the amount of the fee. These fees must be included in a notice that is located in a "prominent and conspicuous" location on or at the ATM. This notice must also appear on the ATM screen or on a paper receipt, either of which must be provided before the consumer is committed to completing the transaction.

This requirement regarding fee disclosures will include balance inquiries, even though balance inquiries are not subject to the other requirements of Regulation E. Also, ATM operators will not required to comply with these disclosure requirements until December 31, 2004 if the ATM machine lacks the technical capability to provide the fee information.

Regulation E currently requires that disclosures be provided by the financial institution that holds the consumer's account 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 will require that these initial disclosures include a notice that a fee may be imposed by: 1) an ATM operator not holding the consumer's account; and 2) any national, regional, or local network used to complete the transaction. This requirement will also include national networks that operate internationally. If a financial institution's disclosure does not currently include such a provision, it may comply with this requirement by including an insert that describes these ATM surcharges.

The proposed rule includes the following model clause for this new requirement regarding the initial disclosures:

"When you use an ATM not owned by us, you may be charged a fee by the ATM operator or any network used to complete the transfer (and you may be charged a fee for a balance inquiry."

QUESTIONS TO CONSIDER REGARDING THE FED'S PROPOSED RULE ON ATM FEES

Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com