HARRISBURG, Penn.-One credit union is trying to turn the tide against the so-called ATM vigilantes.

Taking a stand against a lawsuit regarding ATM fee disclosures instead of settling, Pennsylvania State Employees CU watched one plaintiff back down and withdraw his complaint against the $4-billion CU. Gerald Riviello asserted in his complaint that a PSECU ATM was missing a decal warning of a possible surcharge, a violation of the fee disclosures requirements of the Electronic Funds Transfer Act, which requires ATM owners to post notification of fees to be charged non-customers both on-screen and on the outside of the machine.

Riviello is among a proliferating group of individuals who are filing suits against credit unions and banks over provisions of the EFTA, and more recently over provisions of the Americans With Disabilities Act. Many of the FIs subjected to the lawsuits have been opting to simply settle the claims.

"I hope if other credit unions are faced with these kinds of frivolous legal actions, if the credit union is in the right, they think long and hard before moving to do what might be considered the economically right thing and settle," said CEO Greg Smith. "Settling may be seen as the best business decision, pay a relatively small amount and move on, but then all you do is encourage this kind of bad behavior from these serial lawsuit filers."

Riviello has also filed similar EFTA suits against Tobyhanna FCU, Choice One Community FCU, Penn State FCU, Philadelphia FCU, New York's SEFCU, and a handful of banks.

Riviello filed his complaint against PSECU in federal court on July 28, 2011. Instead of settling the case, PSECU filed a response and won a summary judgment in U.S. District Court, Middle District of Pennsylvania, on March 28. Riviello then appealed to the 3rd Circuit Court of Appeals in Philadelphia. Following a series of back-and forth exchanges between the plaintiff's counsel and PSECU-which included Riviello asking for various dollar amounts in an effort to settle and PSECU saying it would not give Riviello any money-Riviello withdrew his appeal and complaint.

"We won because we didn't play his game," said Smith. "I think he expected us to simply make an economic decision, which is to settle and not mount a defense, not engage counsel, and not file briefs and returns. But Riviello does not know PSECU, and he does not know me. I don't think he expected us to follow him to the appeals court. I am stubborn and principled and this suit is just wrong. We know our machines are compliant."

In the federal court decision, U.S. Judge Robert Mariani ruled PSECU provided enough evidence to show it had posted the required notification and reposted it after credit union employees learned the original notice had been removed or fell off.

"We showed we had a process for making sure the decals were on the machines, and when we learned through Riviello's complaint one decal's adhesive had failed, we immediately replaced the decal and provided photo evidence, showing the judge we had a monitoring system," the CEO explained.

When PSECU installs a new ATM, it takes photos of the entire machine and files them with the records for that ATM. When it replenishes an ATM or unloads checks at a depository ATM, staff follows a checklist of things they do every time, including checking for a fee disclosure decal.

Riviello also saw his suit against Philadelphia FCU, Philadelphia, recently dismissed in federal court. That lawsuit claimed the credit union violated the fee disclosures requirements of the Electronic Funds Transfer Act and the handicapped provisions of the Americans With Disabilities Act.

Smith contended that what can proliferate these types of lawsuits are credit unions, as a matter of routine, turning over suits to their bonding companies to take care of the problem. "Maybe the credit union does not have much experience dealing with legal actions. The bonding companies most likely look at these suits from a purely economic point of view and settle. They can recover their costs through premium increases."

Phil Tschudy, media relations manager for CUNA Mutual Group, explained how CMG addresses such matters. "All claims are unique to their specific facts. CUNA Mutual Group's claims philosophy in regards to litigation is to aggressively defend these claims for our insured."

But Smith has no sympathy for credit unions that are not following the EFTA fee disclosures requirements, or the handicapped provisions of the Americans With Disabilities Act, which has opened the door for more lawsuits against financial institutions. "We have 130 ATMs and it cost us $1.5 million to get them compliant for the April 15 ADA deadline," said Smith. "If our machines were not compliant at that time, we would have turned them all off. How could you not see the ADA lawsuits coming with all the suits that were filed regarding fee disclosures? If your ATMs are out of compliance and you think these people will not find you, you are wrong. In my opinion, if a credit union is sued because its ATMs are out of compliance, and the CU is at fault, the board should make the CEO pay the fine."

History Of The Lawsuit

Riviello filed his complaint against PSECU in federal court on July 28, 2011. Instead of settling the case, PSECU filed a response and won a summary judgment in U.S. District Court, Middle District of Pennsylvania, on March 28. Riviello then appealed to the 3rd Circuit Court of Appeals in Philadelphia. Following a series of back-and forth exchanges between the plaintiff's counsel and PSECU-which included Riviello asking for various dollar amounts in an effort to settle and PSECU saying it would not give Riviello any money-Riviello withdrew his appeal and complaint.

"We won because we didn't play his game," said Smith. "I think he expected us to simply make an economic decision, which is to settle and not mount a defense, not engage counsel, and not file briefs and returns. But Riviello does not know PSECU, and he does not know me. I don't think he expected us to follow him to the appeals court. I am stubborn and principled and this suit is just wrong. We know our machines are compliant."

In the federal court decision, U.S. Judge Robert Mariani ruled PSECU provided enough evidence to show it had posted the required notification and reposted it after employees learned the original notice was gone. "We showed we had a process for making sure the decals were on the machines, and when we learned through Riviello's complaint one decal's adhesive had failed, we immediately replaced the decal and provided photo evidence, showing the judge we had a monitoring system," the CEO explained.

When PSECU installs a new ATM, it takes photos of the entire machine and files them with the records for that ATM. When it replenishes an ATM or unloads checks at a depository ATM, staff follows a checklist of things they do every time, including checking for a fee disclosure decal.

Riviello also saw his suit against Philadelphia FCU, Philadelphia, recently dismissed in federal court. That lawsuit claimed the CU violated the fee disclosures requirements of the Electronic Funds Transfer Act and provisions of the ADA.

Smith contended that what can proliferate these types of lawsuits are credit unions, as a matter of routine, turning over suits to their bonding companies to take care of the problem. "Maybe the credit union does not have much experience dealing with legal actions. The bonding companies most likely look at these suits from a purely economic point of view and settle. They can recover their costs through premium increases."

Phil Tschudy, media relations manager for CUNA Mutual Group, explained how the firm addresses such matters. "All claims are unique to their specific facts. CUNA Mutual Group's claims philosophy in regards to litigation is to aggressively defend these claims for our insured."

 

No Sympathy For Violators

But Smith has no sympathy for CUs that are violating EFTA or ADA, which has opened the door for more lawsuits against financial institutions. "We have 130 ATMs and it cost us $1.5 million to get them compliant for the April 15 ADA deadline," said Smith. "If our machines were not compliant at that time, we would have turned them all off. How could you not see the ADA lawsuits coming with all the suits that were filed regarding fee disclosures? If your ATMs are out of compliance and you think these people will not find you, you are wrong. In my opinion, if a credit union is sued because its ATMs are out of compliance, and the CU is at fault, the board should make the CEO pay the fine."

Subscribe Now

Authoritative analysis and perspective for every segment of the credit union industry

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.