BILL ANALYSIS
AB 3366
Page 1
ASSEMBLY THIRD READING
AB 3366 (Knox)
As Amended May 15, 1996
Majority vote
BANKING AND FINANCE 13-0
SUMMARY: Requires point-of-transaction disclosure of most
surcharges and fees charged for automated teller machine (ATM)
transactions. Specifically, this bill:
1) Requires that operators of ATMs disclose, either electronically
or by printed visible notice on the ATM, all surcharges or fees
for service charged to the user, and gives the user an
opportunity to cancel the transaction prior to the imposition
of the surcharge or fee.
2) Provides that an operator of an ATM shall not be required to
disclose any surcharge or fee that any third party financial
institution charges its own customers for using a
nonproprietary ATM.
FISCAL EFFECT: None
EXISTING LAW:
1) Requires an operator of an ATM who imposes a surcharge on users
of the ATM who are not customers of that particular ATM
operator to disclose the surcharge that the ATM operator
charges to the user prior to completion of the transaction.
2) Does not prevent an operator of an ATM from imposing a
surcharge on any user of that ATM regardless of whether or not
that user is a customer of that ATM operator or not.
BACKGROUND: Typically there are two types of ATM transaction
fees which can be charged: an access or "front-end" fee which is
charged by the owner or operator of the ATM on the user and an
interchange or "back-end" fee which is charged by the issuer of
the user's ATM card (i.e., the customer's own bank). Under
internal operating rules established by the two largest national
ATM network operators (i.e., VISA's Plus network and MasterCard's
Cirrus System, Inc.) prior to April 1, 1996, banks could only
charge the back-end interchange fee to their own customers who
used ATM cards issued by that bank at another operators' ATM. On
April 1, 1996 Plus and Cirrus changed their internal operating
rules to now allow ATM operators to charge noncustomers the
front-end access fee. The above-described rules also restrict the
amount of this front-end fee to $2.50 per transaction and require
that the ATM operator disclose the imposition of any front-end
access fee to the user and give the user the ability to cancel the
transaction before being charged. It is estimated that the
overwhelming majority of ATMs in California are covered by these
Plus and Cirrus regulations.
AB 3366
Page 2
There is no law in California which regulates who can charge a fee
for the use of an ATM or how much that fee can be. The disclosure
provision in current California law applies only to the front-end
access fee and is not as detailed in scope as the requirements of
the private regulations concerning such things as how visible the
disclosure is, if it is at eye level or not, and what
manner the disclosure takes (i.e., if both a sticker and
electronic disclosure is required).
Finally, there is nothing in California law which requires banks
to disclose, at the actual point of contact with the ATM, the
amount of the back-end fee or other types of transaction fees
(such as the fee for obtaining a "mini-statement" of past account
activity), if any, that the bank charges to its own customers.
Currently all such fees of this type are required to be disclosed
in writing when the customer opens up his or her account with the
bank or by mail notice when the bank begins charging such fees.
Bank of America recently began to electronically disclose the fee
that they charge their own customers when they choose to get a
mini-statement of past account activity. However, nothing in law
prevents Bank of America from ending such voluntary disclosure
tomorrow.
ARGUMENTS IN SUPPORT: This bill does not attempt to regulate the
substance of bank ATM fees and only requires their disclosure at
the point where the consumer can most benefit from such
information, at the ATM itself. Bank ATM fees are rising and
account for a substantial amount of money to customers which ought
to be disclosed to customers. Even though front-end fee
disclosure may be required by private association rules, and
perhaps by federal regulations, such disclosure of front-end fees
should be enacted into state statute to ensure that if the private
regulations are discontinued or if the federal government chooses
not to enforce any federal regulations, that California consumers
are given the benefit of full disclosure of this important
information. As to the disclosure of back-end fees, while it
might not be feasible to require ATM operators to determine and
disclose what other banks are charging their customers, it is not
unreasonable to require an ATM operator to disclose all possible
fees which it is charging its own customers, including front-end
access fees, any back-end interchange fee and all other
miscellaneous fees for other services such as mini-statements.
ARGUMENTS IN OPPOSITION: Amendments taken in committee by the
author have removed all opposition.
Analysis prepared by: Blake Campbell / abf / 324-7317
FN
023811