Banks Sue City to Halt Implementation of ATM Surcharge Ban
By Jorge Casuso
California bankers filed a federal court action to overturn Santa Monica's ban on ATM surcharges Wednesday, the day after voters overwhelmingly approved an identical measure in San Francisco, which also is being challenged as unconstitutional.
The action seeks to halt implmentation of the two ordinances, which prevent financial institutions from charging non-customers a fee for using their Automated Teller Machines.
"Laws restricting the right of businesses to price their products and services are not in the interest of businesses or consumers and would set a disturbing precedent in a free market," said Chris Chenoweth, general counsel of the California Bankers Association, one of the plaintiffs. "We believe that the city governments are overstepping their authority by imposing pricing restrictions on federally regulated financial institutions."
The CBA, which represents more than 280 member banks, was joined in the action by California's two largest banks, Welles Fargo and Bank of America, federally regulated institutions that control the lion's share of the state's bank ATMs.
The plaintiffs contend that state banks, as well as national banks,
should not be governed by the ordinances because voters would not
have approved them is they had known nationally chartered banks would
The Santa Monica City Attorney contends that the 1978 Electronic Funds Transfer Act gives cities powers to protect consumers in the area of ATMs.
"We disagree," said deputy city attorney Adam Radinsky, who drafted the city's ordinance. "Federal law gives us the right to regulate ATMs."
The plaintiffs requested that the Federal Court for the Northern District of California grant a preliminary injunction to prevent the ordinances from taking effect. Santa Monica's ordinance, which was approved by the City Council on Oct. 12, goes into effect on Nov. 11. San Francisco's law takes effect in early December.
A hearing is scheduled in San Francisco Federal Court Nov. 15.
"We did the right thing for the right reasons," said Kevin McKeown, one of the sponsers of the Santa Monica ordinance, which is sparking similar measures in other jurisdictions. "I think it will stand up, and we're willing to defend it."