Quick quiz: What is the purpose of an ATM?
A) To provide banks additional opportunities to profitably serve their customers.
B) To provide the federal government additional opportunities to make and enforce silly regulations.
I'm beginning to think someone has gotten the wrong answer. Recently, I blogged about ATM accessibility rules: The machines must be convenient not only for those customers for whom it's profitable to make them conveninent, but also, at considerable expense, for the blind .
Now I learn, thanks to the Manhattan Institute's Point of Law blog , that the federal government not only requires ATMs that charge fees to carry fee notices on the outside of the machines, but empowers customers to act as private attorneys general, driving around hunting for ATMs that lack the notices and suing the banks that own them. (The damages they can win even give them an incentive to rip off the notices themselves -- although if the bank can show that it posted the notice and someone else removed it, it doesn't have to pay .)
One might argue that it's reasonable to require the notices, which are often printed on stickers, because customers are entitled to know the terms of an agreement before they make it. But the law also requires the ATMs to display or print out a notice of the fee and give the customer a chance to explicitly accept or decline; the notice on the machine's case at most saves the customer the few seconds it would take to stick in his card and get to the on-screen fee notice. We're talking here about lawsuits over missing stickers -- stickers that do very little good for anyone.
Moreover, banks that lose the lawsuits don't just have to return the fees: they can be liable for up to $1,000 to an individual plaintiff or $500,000 to a class (see footnote on page 2 of this ). Because the fees themselves are typically less than $5, it's difficult to see any purpose to such a high figure except to punish the ATM owners and encourage people to file lawsuits against them. All because of missing stickers.
The good news is, banks and credit unions are fighting back . The House of Representatives has passed a bill to get rid of the requirement that a fee notice be attached to the outside of every ATM. Customers would still be entitled to an on-screen or printed notice and the chance to decline the fee once they know what it is. Similar legislation is pending in the Senate.