Disclosures at Automated Teller Machines (Regulation E), 18221-18224 [2013-06861]

Agencies

• BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 78, Number 58 (Tuesday, March 26, 2013)]
[Rules and Regulations]
[Pages 18221-18224]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-06861]



========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 
Prices of new books are listed in the first FEDERAL REGISTER issue of each 
week.

========================================================================


Federal Register / Vol. 78, No. 58 / Tuesday, March 26, 2013 / Rules 
and Regulations

[[Page 18221]]


-----------------------------------------------------------------------

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1005

[Docket No. CFPB-2013-0006]
RIN 3170-AA36


Disclosures at Automated Teller Machines (Regulation E)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Bureau of Consumer Financial Protection is amending 
Regulation E (Electronic Fund Transfers), which implements the 
Electronic Fund Transfer Act (EFTA), and the official interpretation to 
the regulation. In December 2012, Congress passed and the President 
signed legislation amending the EFTA to eliminate a requirement that a 
fee notice be posted on or at automated teller machines, leaving in 
place the requirement for a specific fee disclosure to appear on the 
screen of that machine or on paper issued from the machine. This final 
rule amends Regulation E to conform to the EFTA amendment.

DATE:  This rule is effective on March 26, 2013.

FOR FURTHER INFORMATION CONTACT: Joseph Devlin, Counsel, Office of 
Regulations, Bureau of Consumer Financial Protection, 1700 G Street 
NW., Washington, DC 20552, at (202) 435-7700.

SUPPLEMENTARY INFORMATION: 

I. Background

ATM Fees

    Consumers using automated teller machines \1\ (ATMs) not provided 
by their financial institution (foreign ATMs) to withdraw money or 
check balances will typically pay two fees for a single transaction. 
First, the operator of the foreign ATM (which may or may not be a 
financial institution) will usually impose a charge. A recent survey 
indicates that the average ATM charge imposed by foreign ATMs is 
$2.40.\2\ Second, the consumer's own financial institution also may 
impose a charge for using a foreign ATM. That charge averages $1.40, 
according to the same survey. Thus, the average total charge for using 
a foreign ATM, combining the foreign ATM fee and the fee charged by the 
consumer's own financial institution, is $3.80. The average foreign ATM 
charge has risen steadily since 2004, when the charge was less than 
$1.50.
---------------------------------------------------------------------------

    \1\ The new statutory amendment in Public Law Number 112-216 
uses the term ``automatic teller machine'' in the title of the 
legislation, though the Electronic Fund Transfer Act and Regulation 
E use the term ``automated teller machine.'' The Bureau considers 
the two terms to be synonymous.
    \2\ Claes Bell, ATM fees march upward in 2011, Bankrate.com 
(Sept. 26, 2011). https://www.bankrate.com/finance/checking/atm-fees-march-upward-in-2011.aspx. Fee information updated in 2012 is also 
available from Bankrate.com, but it is presented by metropolitan 
area, not as a nationwide average. See https://www.bankrate.com/finance/checking/checking-account-fees.aspx.
---------------------------------------------------------------------------

The Electronic Fund Transfer Act

    Congress amended the Electronic Fund Transfer Act (EFTA) in 1999 to 
require ATM fee disclosures to be both (1) posted ``in a prominent and 
conspicuous location on or at the [ATM],'' and (2) provided on the 
screen or on a paper notice issued from the ATM. As amended, section 
904(d)(3) of the EFTA stated that the on-screen notice had to include 
the specific amount of the fee the consumer would be charged by the 
foreign ATM operator, but the notice posted ``on or at'' the machine 
only had to disclose ``the fact that a fee is imposed by such operator 
for providing the service.'' Section 904(d)(3)(C) of the EFTA barred 
ATM operators from charging a fee if the disclosures did not occur. The 
``on or at'' notice usually involved a sticker placed on the machine by 
the ATM operator. The on-screen or paper notice was required to be 
given ``after the transaction is initiated and before the consumer is 
irrevocably committed to completing the transaction.'' The statute 
allowed operators five years to implement the technology needed to 
disclose on the screen. The statute did not, however, provide that once 
the five years elapsed operators could cease providing the separate 
notice ``on or at'' the machine.
    In a private cause of action brought by a consumer for failure to 
provide the required notices, an ATM operator could be liable for 
actual damages, statutory damages for individual or class actions, and 
costs and attorney's fees.\3\ However, in EFTA section 910(d), Congress 
also established a broad liability protection for the ATM operator if 
the ATM notice ``on or at'' the machine were damaged or removed from 
the machine by someone else.\4\ Thus, the statute provides that an 
operator is not liable if it posted the ``on or at'' notice and someone 
else removed or damaged it.\5\
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 1693m(a); EFTA section 916.
    \4\ 15 U.S.C. 1693h(d), as adopted by section 705 of the Gramm-
Leach Bliley Act, Public Law 106-102 (1999).
    \5\ The Conference Report reiterates this provision: ``ATM 
operators are exempt from liability if properly placed notices on 
the machines are subsequently removed, damaged, or altered by anyone 
other than the ATM operator.'' H.R. Rep. No. 106-434, at 178 (1999) 
(Conf. Rep.).
---------------------------------------------------------------------------

Implementation of the 1999 Amendment

    The Board of Governors of the Federal Reserve System (Board) issued 
regulations to implement the ATM disclosure requirements in 2001 as 
part of Regulation E, which implements EFTA. Those regulations, which 
the CFPB republished in 2011 after authority to implement Regulation E 
transferred to the Bureau, provide at 12 CFR 1005.16(c) that an ATM 
operator must ``[p]ost in a prominent and conspicuous location on or at 
the automated teller machine a notice that'' a fee will or may be 
imposed ``for providing electronic fund transfer services or for a 
balance inquiry.'' The regulation further implemented the statute by 
requiring an on-screen or paper notice that includes the amount of the 
fee and is provided before the consumer is committed to paying a fee.
    Consistent with the statute prior to the December 2012 amendment 
necessitating this rule change, the regulation does not require that 
the ``on or at'' notice disclose the amount of the fee. Also, operators 
are allowed to disclose on or at the machine that a fee ``may'' be 
imposed--rather than ``will'' be imposed--if there are circumstances

[[Page 18222]]

in which an ATM fee may not be charged. The Bureau believes that ``on 
or at'' notices generally use the word ``may.''
    The Official Interpretation to Regulation E, in supplement I to 
part 1005, includes Comment 16(b)-1, which explains the permissibility 
of the use of the word ``may'' in the ``on or at'' the machine 
disclosure, and makes clear that an ATM operator may specify the type 
of service for which a fee will or may apply.
    In the Board's initial rulemaking implementing the 1999 amendments 
to the EFTA, some commenters requested that the Board eliminate the 
``on or at'' notice requirement. The Board, however, responded that it 
lacked the authority to do so: ``Several commenters requested action 
outside the scope of the Board's authority, such as deleting the 
statutory requirement to post a sign about fees at the ATM as 
unnecessary and burdensome or prohibiting ATM surcharges.'' 66 FR 
13409, 13410 (March 6, 2001).

The Bureau's Streamlining Request for Information

    In 2011, rule-writing authority over the EFTA was transferred to 
the Bureau of Consumer Financial Protection (Bureau) by the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Public 
Law 111-203, sec. 1061(b)(1), 124 Stat. 1376 (2010). Shortly after the 
transfer, the Bureau was made aware of long-standing concerns that the 
``on or at'' notice requirement provides little or no benefit to 
consumers and is the subject of costly litigation alleging that the 
``on or at'' notice was not properly posted. Pursuant to those 
concerns, the Bureau sought public comment on the advisability of 
removing this requirement in its Streamlining Inherited Regulations 
Request for Information (Streamlining RFI).\6\ Industry trade 
associations asked the Bureau to remove the requirement if it was 
within its authority to do so or, if not, to clarify publicly that it 
lacked such authority. Many individual banks and credit unions also 
asked the Bureau to remove the requirement. Many of the strongly 
negative comments about the requirement were from small entities, 
including many small ATM operators. An association of state bank 
regulators and an individual state banking division also favored 
removing the requirement.
---------------------------------------------------------------------------

    \6\ 76 FR 75825 (Dec. 5, 2011). This was one of many issues on 
which the RFI solicited comment.
---------------------------------------------------------------------------

    Industry commenters argued that: (1) The requirement does not 
benefit consumers because almost all consumers know that a fee will be 
charged, and the on-screen disclosure provides sufficient notice of the 
fee and amount before the transaction takes place; (2) vigilant 
compliance with the provision adds to costs; (3) the litigation over 
the provision is costly and threatens the existence of some small 
operators, potentially reducing ATM availability for consumers; and (4) 
some of the ``on or at'' notices are removed in order to support 
litigation, and the provision providing liability protection is not 
sufficient because of evidentiary problems.
    In contrast, a joint letter of several leading consumer and 
community groups opposed removing the requirement. In addition, four 
national consumer groups wrote to Congress opposing legislation to 
remove the requirement. The consumer groups proposed instead that the 
Bureau clarify the statutory provision that gives ATM operators 
immunity from liability in certain cases. An attorney who has brought 
cases against banks wrote two comment letters to the Bureau in support 
of the requirement.
    The consumer advocates argued that: (1) The Bureau has no authority 
to remove the requirement without Congressional action; (2) some 
consumers are unaware that a foreign ATM will charge a fee, and they 
will be less likely to forgo a transaction they have almost completed; 
(3) the ``on or at'' notice may be the only indication a consumer gets 
of the potential fee charged by the consumer's own financial 
institution; and (4) ATM operators who are the subject of litigation 
have violated the law.

The December 2012 Statutory Amendment

    While the Bureau was considering this issue, legislation amending 
the relevant provision of the EFTA passed Congress and was signed into 
law on December 20, 2012 (December 2012 Legislation). Public Law 112-
216. The legislation amends only the specific provision, at EFTA 
section 904(d)(3)(B), addressing the ATM fee disclosures, deleting the 
``on or at'' requirement and some obsolete transitional language. The 
on-screen or paper disclosure requirement remains unchanged.

II. Legal Authority

    The Bureau is issuing this final rule pursuant to its authority 
under EFTA and the Dodd-Frank Act. Effective July 21, 2011, section 
1061 of the Dodd-Frank Act transferred to the Bureau the ``consumer 
financial protection functions'' previously vested in certain other 
Federal agencies. The term ``consumer financial protection functions'' 
is defined to include ``all authority to prescribe rules or issue 
orders or guidelines pursuant to any Federal consumer financial law, 
including performing appropriate functions to promulgate and review 
such rules, orders, and guidelines.'' \7\ EFTA is a Federal consumer 
financial law.\8\ Accordingly, effective July 21, 2011, except with 
respect to persons excluded from the Bureau's rulemaking authority by 
section 1029 of the Dodd-Frank Act, the authority of the Board to issue 
regulations pursuant to EFTA transferred to the Bureau.
---------------------------------------------------------------------------

    \7\ Public Law 111-203, sec. 1061(a)(1) (2010). Effective on the 
designated transfer date, the Bureau was also granted ``all powers 
and duties'' vested in each of the Federal agencies, relating to the 
consumer financial protection functions, on the day before the 
designated transfer date. Id. sec. 1061(b).
    \8\ Public Law 111-203, sec. 1002(14) (defining ``Federal 
consumer financial law'' to include the ``enumerated consumer 
laws''); id. Sec. 1002(12) (defining ``enumerated consumer laws'' to 
include EFTA).
---------------------------------------------------------------------------

    EFTA, as amended by the Dodd-Frank Act, authorizes the Bureau to 
``prescribe rules to carry out the purposes of [EFTA].'' Public Law 
111-203, sec. 1084(3); 15 U.S.C. 1693b(a). Section 904(d)(3) \9\ of 
EFTA, as amended by Dodd-Frank Act section 1084(1), requires those 
rules to mandate specific fee disclosures at ATMs.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 1693(d)(3).
---------------------------------------------------------------------------

III. Summary of the Final Rule

    The December 2012 Legislation deletes from the EFTA the requirement 
that a fee notice be posted ``on or at'' an ATM. The Bureau, therefore, 
is issuing a final rule conforming Regulation E to the statutory 
amendment eliminating this requirement. Section 1005.16 of Regulation E 
is now amended by deleting the language requiring that disclosure. ATM 
operators will now only have to provide the on-screen or paper 
disclosure, which includes the amount of the fee to be charged and is 
provided before the consumer is committed to the transaction.
    In addition to the deletion of the rule language requiring the ``on 
or at'' the machine disclosure, the Bureau is deleting Official Comment 
16(b)(1)-1, which interpreted that requirement in regard to the 
permissible use of the word ``may'' in the disclosure, as well as the 
use of more specific language in making the ``on or at'' the machine 
disclosure. Because the requirement to which the comment pertains has 
been eliminated, there is no longer a need for this interpretation.

[[Page 18223]]

IV. Section 1022(b)(2) of the Dodd-Frank Act

    In developing the final rule, the Bureau has considered potential 
benefits, costs, and impacts,\10\ and has consulted or offered to 
consult with the prudential regulators and the Federal Trade 
Commission, including regarding consistency with any prudential, 
market, or systemic objectives administered by such agencies.
---------------------------------------------------------------------------

    \10\ Specifically, section 1022(b)(2)(A) calls for the Bureau to 
consider the potential benefits and costs of a regulation to 
consumers and covered persons, including the potential reduction of 
access by consumers to consumer financial products or services; the 
impact on depository institutions and credit unions with $10 billion 
or less in total assets as described in section 1026 of the Act; and 
the impact on consumers in rural areas. The manner and extent to 
which the provisions of section 1022(b)(2) apply to a rule of this 
kind are unclear. Nevertheless, to inform this rulemaking more 
fully, the Bureau performed the described analyses and 
consultations.
---------------------------------------------------------------------------

    The final rule deletes a requirement that an ATM operator post a 
notice on or at an ATM machine informing consumers that a fee will or 
may be charged for use of the machine. Because this final rule merely 
conforms a regulation to a mandatory statutory amendment, and does not 
involve any exercise of agency discretion, the Bureau does not believe 
that the rule itself will have any benefits, costs, or impacts beyond 
those caused by the statute. In addition, the Bureau does not expect 
the final rule to cause a reduction in consumer access to credit. 
However, for informational purposes, the following discussion considers 
the benefits, costs, and impacts of the statutory amendment being 
implemented.
    The Bureau believes that the benefits of the ``on or at'' notice 
requirement for consumers were likely more significant when it was 
adopted than they are today. The Bureau understands that when the 
requirement was enacted in 1999, ATMs did not always disclose fees on-
screen. That is presumably why the statute allowed the industry five 
years to come into compliance with the on-screen requirement. Thus, for 
several years, the ``on or at'' notice might be the only fee disclosure 
a consumer would receive at the ATM.
    Now, however, the Bureau believes that awareness that foreign ATMs 
charge a fee is already widespread, and thus the ``on or at'' notice 
provides little benefit to consumers with respect to foreign ATM 
fees.\11\ Moreover, the ``on or at'' notice contains much less useful 
information about the foreign ATM fee than the on-screen disclosure. 
The ``on or at'' notice does not tell the consumer the amount of the 
fee or whether or not a fee will be charged--it usually only states 
that a fee ``may'' be charged. For these reasons, the Bureau considers 
the consumer benefit from the requirement being eliminated to be 
minimal.
---------------------------------------------------------------------------

    \11\ The Bureau found only one study of awareness, which is over 
a decade old. A 2000 consumer survey commissioned by an ATM network 
(PULSE) found that 86 percent of consumers surveyed said they were 
adequately informed of charges they sometimes pay to withdraw cash 
from ATMs. The PULSE network, Pulsations (May 2000). Moreover, 96 
percent of consumers who said they paid a surcharge in the last 14 
days reported feeling that ATM fee disclosures were sufficient. The 
Bureau believes this survey has limited value since respondents may 
have felt disclosures were adequate but have been ignorant of the 
fees. Moreover, it is possible that consumers claimed awareness in 
part because they had read the notice ``on or at'' the ATM. However, 
the Bureau believes that whatever the level of awareness of foreign 
institution fees, the level will not drop significantly when the 
notice on or at the ATM is removed. The on-screen disclosure is 
clear and pointed and requires the consumer affirmatively to accept 
the fee before proceeding.
---------------------------------------------------------------------------

    In contrast, the Bureau considers the on-screen disclosure of the 
foreign fee amount and the screen's prompt requiring the consumer to 
agree to the fee to be a more effective means of disclosure. Although 
the consumer must begin the transaction before receiving this 
disclosure, the disclosure must occur before the transaction is 
completed, and the consumer then has the necessary price information 
before purchasing the service. The Bureau understands that fees at 
foreign ATMs have been increasing, so a disclosure of the specific 
price before purchase appears to be the most effective way to empower 
consumers in regard to this type of transaction. This consumer benefit 
will continue undisturbed when the ``on or at'' the machine disclosure 
is eliminated.
    In regard to a consumer's own financial institution charging a fee 
for using a foreign ATM, neither the regulation nor the statute 
currently requires the ATM operator to disclose the potential existence 
or amount of that fee, of which the foreign ATM operator has no 
knowledge. Rather, the consumer's financial institution is required to 
disclose the fee when the account is opened and on a monthly statement 
when the fee is charged.\12\ Also, the ongoing nature of consumers' 
relationships with their own financial institutions should help to 
discipline fee pricing better than a disclosure given as part of the 
one-off transactions that often occur with foreign ATMs. Accordingly, 
the ATM fee charged by consumers' own financial institutions for use of 
foreign ATMs appears to be less potentially harmful for consumers in 
the first place, and the disclosure that is being eliminated provided 
minimal consumer benefit in regard to it.
---------------------------------------------------------------------------

    \12\ 12 CFR 1005.7(b)(5), 12 CFR 1005.9(b)(3).
---------------------------------------------------------------------------

    The compliance burden of the disclosure being eliminated appears 
not to have been very large. Costs included purchase of stickers or 
other disclosure means, personnel costs for placing and replacing 
stickers or other disclosure means, and monitoring whether or not the 
disclosures remained present and undamaged. Because the machines would 
need to be serviced and stocked regularly, it is likely that little 
extra travel or work time was needed. However, there was some burden, 
which is now being eliminated.
    The statutory amendment and this conforming final rule have no 
unique impact on insured depository institutions or insured credit 
unions with $10 billion or less in assets as described in section 1026 
of the Dodd-Frank Act, nor does the amendment or this rule have a 
unique impact on rural consumers.

V. Administrative Procedure Act

    Under the Administrative Procedure Act (APA), notice and 
opportunity for public comment are not required if the Bureau finds 
that notice and public comment are impracticable, unnecessary, or 
contrary to the public interest. 5 U.S.C. 553(b)(B). Pursuant to this 
final rule, 12 CFR 1005.16 is amended to conform to a statutory change. 
The Bureau finds there is good cause under APA section 553 to issue 
this amendment to Regulation E as a final rule without advance notice 
and public comment because ``notice and public procedure thereon are 
impracticable, unnecessary, or contrary to the public interest.''
    Because the December 2012 Legislation mandates the elimination of 
the ``on or at'' the machine disclosure requirement, notice-and-comment 
procedures on this rule are unnecessary. Any delay in conforming the 
regulation to Congress's mandate as a result of such procedures would 
perpetuate inconsistency and confusion contrary to the public interest. 
Moreover, the Bureau is already informed as to the major concerns of 
stakeholders in this issue through the public comments received in 
response to the Streamlining RFI. For these reasons, the Bureau has 
determined that publishing a notice of proposed rulemaking and 
providing opportunity for public comment are unnecessary and contrary 
to the public interest. The Bureau adopts the amendment in final form.
    Further, under section 553(d) of the APA, the required publication 
or service of a substantive rule must be made not less than 30 days 
before its effective

[[Page 18224]]

date except for certain instances, including when a substantive rule 
grants or recognizes an exemption or relieves a restriction. 5 U.S.C. 
553(d). As this rule relieves a disclosure requirement and restriction 
on charging ATM fees, and is therefore a substantive rule that relieves 
requirements and restrictions, the Bureau is publishing this final rule 
less than 30 days before its effective date. As it is in the public 
interest to make the regulation conform to the statute as soon as 
possible, the Bureau is making the final rule effective immediately 
upon publication in the Federal Register.

VI. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) does not apply to a rulemaking 
where general notice of proposed rulemaking is not required. 5 U.S.C. 
603 and 604. As noted previously, the Bureau has determined that it is 
unnecessary to publish a general notice of proposed rulemaking for this 
final rule. Accordingly the RFA's requirements relating to an initial 
and final regulatory flexibility analysis do not apply.

VII. Paperwork Reduction Act

    According to the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 
3501 et seq., and notwithstanding any other provisions of law, the 
Bureau may not conduct or sponsor, and a respondent is not required to 
respond to, an information collection unless it displays a valid Office 
of Management and Budget (OMB) control number. The collection of 
information related to this final rule has been previously reviewed and 
approved by the Office of Management and Budget (OMB) in accordance 
with the PRA, 44 U.S.C. 3507(d), and assigned OMB Control Number 3170-
0014 (Expiration Date 03/31/15). The Bureau determined that this final 
rule would not impose any new recordkeeping, reporting, or disclosure 
requirements on covered entities or members of the public that would 
constitute collections of information requiring approval under the PRA. 
This final rule revises a third-party disclosure requirement currently 
approved under the aforementioned OMB control number by eliminating the 
requirement that ATMs have an ``on or at'' notice posted disclosing 
that a consumer will or may be charged a fee. The Bureau has filed a no 
material non-substantive change request with OMB requesting that this 
third-party disclosure requirement be moved from OMB control number 
3170-0014.

List of Subjects in 12 CFR Part 1005

    Consumer protection, Electronic funds transfers, Reporting and 
recordkeeping requirements, Automated teller machines.

Authority and Issuance

    For the reasons set forth above, the Bureau is amending Regulation 
E, 12 CFR part 1005, as set forth below:

PART 1005--ELECTRONIC FUND TRANSFERS (REGULATION E)

0
1. The authority citation for Part 1005 continues to read as follows:

    Authority:  12 U.S.C. 5512, 5581; 15 U.S.C. 1693b.

0
2. Amend Sec.  1005.16 by revising paragraphs (b) through (d) to read 
as follows:


Sec.  1005.16  Disclosures at automated teller machines.

* * * * *
    (b) General. An automated teller machine operator that imposes a 
fee on a consumer for initiating an electronic fund transfer or a 
balance inquiry must provide a notice that a fee will be imposed for 
providing electronic fund transfer services or a balance inquiry that 
discloses the amount of the fee.
    (c) Notice requirement. An automated teller machine operator must 
provide the notice required by paragraph (b) of this section either by 
showing it on the screen of the automated teller machine or by 
providing it on paper, before the consumer is committed to paying a 
fee.
    (d) Imposition of fee. An automated teller machine operator may 
impose a fee on a consumer for initiating an electronic fund transfer 
or a balance inquiry only if:
    (1) The consumer is provided the notice required under paragraph 
(c) of this section, and
    (2) The consumer elects to continue the transaction or inquiry 
after receiving such notice.


Supplement I to Part 1005   [Amended]

0
3. In Supplement I to Part 1005, remove Section 1005.16.

    Dated: March 20, 2013.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2013-06861 Filed 3-25-13; 8:45 am]
BILLING CODE 4810-AM-P