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


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