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CUNA amicus brief backs lower court ATM ruling
MADISON, Wis. (12/7/12)--The Credit Union National Association (CUNA) is urging a federal appeals court to uphold a lower court decision spelling out how credit unions and ATM vendors qualify for immunity from liability for missing "fee decals," which have been the target of a number of lawsuits brought against the credit unions and vendors.

The lawsuits are proceeding even though the decals are obsolete, since interactive notices also now appear on ATM screens.

In a "friend of the court" brief filed late Wednesday in the U.S. Court of Appeals for the ninth circuit, CUNA argues that the court should hold that "ATM operators are not required to establish the identity of the vandal or third party that removes an affixed fee decal in order to establish immunity from civil liability under the safe harbor defense" under federal law. Adoption of this standard would mean, in effect, that missing stickers are presumed to be the work of vandals for which credit unions will not be held liable.

Doing so, CUNA states, recognizes that ATMs are remote, unmanned, and often beyond any practicable means of surveillance.

Further, CUNA argues that--as found by the lower court--the appeals court should affirm that good faith compliance "should be measured by a standard of reasonableness under the circumstances applicable to the particular ATM and its operator."

Doing so, CUNA states, recognizes that "a 'one-size-fits-all' solution does not address the realities of a diverse, decentralized ATM industry whose financial institutions and other members endeavor in good faith to comply with the Electronic Funds Transfer Act (EFTA) and Regulation E. Under this approach, smaller institutions, with their limited staff, would not be held to an unreasonably high standard concerning the monitoring of their machines.

"This is consistent with the intent of the EFTA and Regulation E and balances consumer protection with the realities of the ATM industry," CUNA wrote.

"Our filing in this case is of critical interest to credit unions facing numerous lawsuits over ATM signage. Just as CUNA seeks results for credit unions in Congress and with regulators, we look for effective opportunities to seek protections in the courts," said CUNA General Counsel and Executive Vice President Eric Richard.

To download CUNA's brief, use the link.

The lower court ruling in the U.S. District Court for the Southern District of California in San Diego outlined two scenarios that show a good-faith compliance effort.

EFTA requires ATM operators to provide notice to the consumer that a fee has been imposed by the operator for providing the service, and the amount of the fee, the court said.

However, the court ruled there are two defenses for a lack of notice.

"The  bona fide error defense provides that 'a person may not be held liable … if that person shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such error,'" the court said. Therefore, "a defendant is not liable for a missing ATM fee notice if: 1)  the defendant maintained 'procedures reasonably adopted to avoid' a missing notice: and 2) the lack of a notice was 'not intentional,' but was a "bona fide error.'"

In the second scenario, the safe harbor defenses provides: "If the notice required to be posted  …  by an automated teller machine operator has been posted by such operator  … and the notice  is subsequently removed, damaged, or altered by any person other than the operator of the automated teller machine, then the operator shall have no liability under his section for failure to comply …"
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