Judge Strikes Down City's ATM Ban

By Jorge Casuso

A federal judge has struck down Santa Monica's pioneering ban on ATM surcharges ruling that any local ordinances restricting banks from charging non-customers an extra fee violates federal law.

Santa Monica officials vowed to appeal Friday's ruling by U.S. District Judge Vaughn Walker, which was made public on Monday.

"We are not surprised at all since the judge had already indicated how he was leaning," said assistant City Attorney Adam Radinsky, who is in charge of defending the city against the banking industry suit. "We are confident federal law is squarely on our side.

"National banks are not above the law, they are not immune from the law and the judge's ruling was incorrect," Radinsky said. "States and cities can regulate ATMs."

The ruling also strikes down a similar ban approved by San Francisco voters. San Francisco also is expected to appeal ruling, though it is unclear whether the two cities will do so jointly.

"I think the intent of federal law is to allow consumers to protect themselves from exorbitant ATM fees," San Francisco City Attorney Louise Renne told the Associated Press.

Both cities cited the 1978 Electronic Funds Transfer Act, which governs ATM use, arguing it gives cities powers to protect consumers.

But the judge disagreed, siding with the banks' suit, which contends that city governments didn't have the power to impose price restrictions on federally regulated financial institutions.

Walker had ruled in a restraining order last November - shortly after the Santa Monica and San Francisco laws were passed -- that while the EFTA allows cities to regulate the safety, location, lighting and disclosure of fees, it cannot set the amount of the fees, which average about $1.50 per transaction.

Friday's decision will be appealed to the 9th Circuit, which ruled in a 1990 Nevada case that states could regulate bank ATMs.

"The 9th Circuit has explicitly recognized that Congress has left it up to the states and cities to regulate banks," Radinsky said.

The ruling comes eight months after Santa Monica's ban went into effect, triggering a counter attack by California's two biggest banks - Wells Fargo and Bank of America - which stopped allowing non customers to use the 33 ATMs they operate in the city. CalFed later joined the suit.

Santa Monica's law, which prohibits banks from charging non-customers an extra fee for using their machines, fueled a nationwide movement. San Francisco voters passed an identical measure days later and local governments as far flung as Miami, New York and New Orleans began exploring similar bans.

The suit, which challenged the bans as unconstitutional, was filed in federal court on Nov. 3, the day after San Francisco voters overwhelmingly approved their measure.