CONSUMER GROUPS TO FIGHT

CU-BACKED ATM DISCLOSURE BILL

WASHINGTON-Credit unions are again running afoul of their nominal allies, the consumer groups, as they lobby Congress to roll back disclosure requirements for fees charged to non-customers at the ATM.

A broad group of consumer organizations, including the CU-supported Consumer Federation of America, as well as U.S. Public Interest Group and Consumers Union, have told Congress they are opposed to a bill that would eliminate the requirement that ATM owners display the fees they charge non-customers (surcharges) both on-screen and on the side of the machines via placard. A bill scheduled for debate before a House Financial Services Subcommittee this week would eliminate the requirement for the placard because of the on-screen disclosure.

The bill is the latest in a growing number of issues in which credit unions are teaming with their arch-enemies, the bankers, against the consumer groups. In recent years the two sides have fought over debit card fees, overdraft legislation, credit card fees, mortgage bankruptcy, and now ATM disclosures.

The dual ATM disclosure is required under the Electronic Funds Transfer Act, known as Reg E. Credit unions and banks point to the growing cottage industry in which consumers are suing ATM owners over the absence of the placard. At least two dozen credit unions have entered into settlements with consumers of such suits.

Ryan Donovan, chief lobbyist for CUNA, said they believe the single on-screen disclosure is enough to inform consumers about the fees they will be charged for using the ATM and that the dual disclosure amounts to an invitation for the growing number of suits. He says the dual disclosure is costly for credit unions.

The consumer groups say they understand the concerns over the expanding numbers of suits but believe the additional disclosure is necessary. "We strongly support the retention of the disclaimer (on the machine)," Edwin Mierzwinski, consumer program director for U.S. Public Interest Group, said. But Mierzwinski said the consumer lobby is willing to work with credit unions and banks on ways to minimize frivolous lawsuits on the disclosures.

Travis Plunkett, chief lobbyist for the credit union-backed Consumer Federation of America, said the CFA has not adopted a formal stance yet but he also favors retention of the on-site disclosure. The consumer lobbyist said a compromise, such as having the Consumer Financial Protection Bureau arbitrate disputes on the disclosures, instead of the courts, may be acceptable to the consumer groups.

The emerging battle comes as a congressional panel is widely expected to endorse the credit union- and bank-backed ATM bill as soon as this week.

US PIRG's Mierzwinski said he is not convinced the on-screen disclosures alone are adequate consumer protection. He said he believes once a consumer has read the on-screen disclosures he is almost certain to complete the transaction. "Once you get to the on-screen disclosures you're pretty much done; you've pretty much made the decision to go forward," he said. His group is investigating claims by some consumers that even after they tried to cancel transactions after reading the on-screen disclosures they were charged non-customer fees.

Meantime, CUNA is exploring other avenues on the ATM disclosures. It has asked the Consumer Financial Protection Bureau whether the new agency has the authority under the EFTA, which was formerly enforced by the Federal Reserve, to eliminate the dual disclosure requirement without the need for Congress to pass a bill. CUNA officials, who were meeting last week with CFBP representatives, say under their own legal interpretation the CFPB has that authority.

The consumer agency has yet to issue its own opinion.

FDIC SHUTTERS 3 MORE BANKS,

MAKING 31 FAILURES THIS YEAR

WASHINGTON-The FDIC seized three more banks on last week, one each in Florida, Georgia and Tennessee, making a total of 31 failures for the year.

There have been ten credit union failures so far in 2012. The pace of bank closures has slowed sharply after surging as the financial crisis took hold in 2008. By this time last year, 45 banks had failed.

In 2010, regulators seized 157 banks, the most in any year since the savings and loan crisis. Those failures cost the deposit insurance fund around $23 billion. The FDIC has said 2010 likely was the high-water mark for bank failures from the Great Recession. Last year's 92 failures cost an estimated $7.9 billion.

Last week's bank failures were: $170 million Putnam State Bank in Palatka, Fla.; $156 million Farmers Bank of Lynchburg, in Lynchburg, Tenn.; and $148 million Security Exchange Bank in Marietta, Ga.

The FDIC estimates that the failure of the three banks will cost the bank insurance fund $100 million.

The failure of Putnam State Bank is expected to be the most expensive for the FDIC at about $37.4 million. The other two banks-Security Exchange Bank and The Farmers Bank of Lynchburg-will cost the FDIC about $34.3 million and $28.3 million, respectively.

From 2012 through 2016, bank failures are estimated to cost the FDIC about $12 billion.

eventsNCUA Credit Union Workshop, Orlando, Fla., July 12NCUA Credit Union Workshop, Syracuse, N.Y., July 14NCUA Credit Union Workshop, Jackson, Miss., and Pittsburgh, July 18NCUA Listening Session, Denver, July 31commentCFPB: Comments on Impacts of Overdraft Programs on Consumers due June 29

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.