Current Issues under the Electronic Fund Transfer Act in ATM Litigation

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1 QUARTERLY REPORT 423 Current Issues under the Electronic Fund Transfer Act in ATM Litigation By John L. Ropiequet and Katelyn R. Letizia * I. Introduction John L. Ropiequet is a partner in the Litigation Group of Arnstein & Lehr LLP, Chicago, where he has practiced since 1973, and Co-Chair of its Consumer ˇinance Group. His litigation experience includes consumer finance class action, anti-trust, environmental, and commercial cases in numerous state and federal courts. Mr. Ropiequet is a graduate of The Johns Hopkins University and Northwestern University School of Law. He writes and speaks frequently on issues involving consumer credit class actions, evidentiary privilege, legal ethics and other matters. He is a contributing editor to ROHNER & MILLER, TRUTH IN LENDING (2009 Suppl.), on private remedies for TILA violations and the author of numerous articles on a variety of consumer finance topics in The Business Lawyer, the Consumer Finance Law Quarterly Report and other publications. He is a member of the Governing Committee of the Conference on Consumer ˇinance Law, and Co-Editor of the Annual Survey of Consumer ˇinancial Services Law in The Business Lawyer. Katelyn R. Letizia is an associate in the Litigation Group at Arnstein & Lehr LLP, Chicago. She practices in a variety of areas, devoting significant amounts of time to consumer finance and commercial litigation in state and federal court. Ms. Letizia is a graduate of the University of Illinois and the Chicago-Kent College of Law. As bank automated teller machines (ATMs) have become ubiquitous and heavily used by consumers, the plaintiff s class action bar has sought to find ways to turn them into a revenue source. This has caused both counsel and the courts to re-examine certain provisions of the Electronic ˇund Transfer Act (EˇTA) 1 and Regulation E, 2 which govern ATM transactions, in recent litigation. 3 The EˇTA was enacted in 1978 with the stated purpose to provide a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic fund transfer systems, although it is primarily focused on the provision of individual consumer rights. 4 The EˇTA and Regulation E govern electronic fund transfers, defined as transfers of funds by various electronic means rather than by paper. 5 These include transfers initiated through electronic terminals such as ATMs, point-of-sale terminals, and cash dispensing machines. 6 Generally, the EˇTA and Regulation E require: disclosure of the terms and conditions of an electronic funds transfer service by a person other than the holder of the * The authors represented the defendant in Stilz v. Standard Bank & Trust Co., No. 10-cv-1996, 2010 U.S. Dist. Lexis (N.D. Ill. Dec. 14, 2010), mentioned in this article. 1. Pub. L. No , 92 Stat (1978) (codified as amended at 15 U.S.C r (2006)) CˇR pt. 205, promulgated pursuant to 15 U.S.C. 1693b. 3. See also Robert T. Luttrell, III. & Alvin C. Harrell, Update on Deposit Account, Negotiable Instrument, and Payment System Issues and Developments, 65 Consumer ˇin. L.Q. Rep. 76, 80 (2011) U.S.C. 1693(b) U.S.C. 1693a(6). 6. Id. 1693a(7).

2 424 QUARTERLY REPORT consumer s account; 7 documentation of transfers; 8 and a limitation on consumer liability for unauthorized transfers. 9 The EˇTA requires that a notice of the fee for use of an ATM both be posted on the machine ( posted fee notice ) and appear on the screen before the transaction can be consummated ( screen fee notice ) or, as a little-used alternative to the screen fee notice, be provided on paper prior to consummation. 10 This redundant disclosure requirement for use of ATMs by consumers who may be charged a fee for using the machine has generally been considered to impose strict liability where the posted fee notice is missing, even though the consumer must agree to accept the fee stated on the screen before the transaction can proceed. 11 This factor has encouraged the filing of numerous class actions where posted fee notices are missing or defaced. 12 Cases have also been brought asserting that the disclosure language used in fee notices was misleading. The relatively few reported cases have explored the damages scheme available under the EˇTA in connection with these issues as well as the limited affirmative defenses available in the statute, as ATM operators seek to cope with large potential liability. II. Basic Provisions of the EFTA A. Disclosure Requirements The EˇTA and Regulation E require that an ATM operator, defined as a person who operates an ATM and is U.S.C. 1693b(d) U.S.C. 1693d U.S.C. 1693g U.S.C. 1693b(d)(3); 12 CˇR One of your authors has observed on trips to Canada that Canadian ATMs appear to function well with only a screen fee notice. 12. One attorney in Pittsburgh filed nine EˇTA class actions within a two-week period. See Customers File 9 Federal Lawsuits Seeking ATM Fee Payback, Pittsburgh Tribune-Review (Jun. 1, 2009), available at x/pittsburghtrib/news/pittsburgh/print_ html. Two plaintiffs in Michigan have filed 30 or more such cases, including five in one day. See ATM Fee Lawsuits Hit Back at Banks, Detroit ˇree Press (Apr. 22, 2011), available at not the financial institution which holds the consumer s account, 13 must advise the consumer of the fact that a fee is imposed by such operator for providing the service and the amount of any such fee. 14 ˇurther, they specify how those notices are to be given to customers, including the location of such notices: (c) Notice requirement. To meet the requirements of paragraph (b) of this section, an automated teller machine operator must comply with the following: (1) On the machine. Post in a prominent and conspicuous location on or at the automated teller machine a notice that: (i) A fee will be imposed for providing electronic fund transfer services or for a balance inquiry; or (ii) A fee may be imposed for providing electronic fund transfer services or for a balance inquiry, but the notice in this paragraph (c)(1)(ii) may be substituted for the notice in paragraph (c)(1)(i) only if there are circumstances under which a fee will not be imposed for such services; and (2) Screen or paper notice. Provide the notice required by paragraphs U.S.C. 1693b(d)(3)(D); 12 CˇR (a). The definition in Regulation E includes balance inquiries as well as funds transfers. 12 CˇR (a) U.S.C. 1693b(d)(3)(A)(i)-(ii); see also 12 CˇR (b). (b)(1) and (b)(2) 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. 15 Thus, compliance with the statute requires that an ATM operator must both: (1) provide notice of the fee in a prominent and conspicuous location on the machine; and (2) indicate the amount of that fee either on the screen or in paper form while the consumer is still able to cancel the transaction. 16 If the posted fee notice and the screen fee notice are not both given, the ATM operator may not charge a fee for a funds transfer or balance inquiry: (C) Prohibition on fees not properly disclosed and explicitly assumed by consumer No fee may be imposed by any automated teller machine operator in connection with any electronic fund transfer initiated by a consumer for which a notice is required under subparagraph (A), unless (i) the consumer receives such notice in accordance with subparagraph (B); and (ii) the consumer elects to continue in the manner necessary to effect the transaction CˇR (c); see also 15 U.S.C. 1693b(d)(3)(B). 16. See supra note 15.

3 QUARTERLY REPORT 425 after receiving such notice. 17 B. Damages Provisions and Affirmative Defenses The EˇTA provides for actual and statutory damages for violations of the EˇTA, in a scheme similar to that under the Truth in Lending Act (TILA), allowing recovery of: 18 (1) any actual damage sustained by such consumer as a result of such failure; (2)(A) in the case of an individual action, an amount not less than $100 nor greater than $1,000; or (B) in the case of a class action, such amount as the court may allow, except that (i) as to each member of the class no minimum recovery shall be applicable, and (ii) the total recovery under this subparagraph in any class action or series of class actions arising out of the same failure to comply by the same person shall not be more than the lesser of $500,000 or 1 per centum of the net worth of the defendant; and (3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney s fee as determined by the court U.S.C. 1693b(d)(3)(C); see also 12 CˇR (e). 18. See TILA, 15 U.S.C EˇTA, 15 U.S.C. 1693m(a). In individual actions, statutory damages are subject to the court s consideration of the frequency and persistence of such noncompliance, and the extent to which noncompliance was intentional. 20 Those factors are also to be considered by the court with respect to awards of statutory damages in class actions, along with the nature of the noncompliance, the resources of the defendant, [and] the number of persons adversely affected. 21 Like TILA, the EˇTA provides only a few affirmative defenses. These include: posted fee notices were removed, damaged or altered by someone other than the ATM operator; 22 bona fide unintentional errors despite procedures designed to avoid such errors; 23 and acts or omissions made in good faith reliance on a rule, regulation, interpretation or model form of the Bureau of Consumer ˇinancial Protection or the ˇederal Reserve Board. 24 III. Litigation Developments A. Common Allegations Most ATM class action litigation under the EˇTA has involved ATM machines where the posted fee notice was missing. Given the potentially large liability for a missing notice, the reported cases have focused on affirmative defenses which may be available in such a situation. In addition, there has been some litigation over allegedly misleading language in the fee notice. B. Defenses to EFTA Claims 1. Overview 20. Id. 1693m(b)(1). 21. Id. 1693m(b)(2) U.S.C. 1693h(d) U.S.C. 1693m(c). 24. Id. 1693m(d). ATM operators have pursued three avenues in attempting to avoid liability under the EˇTA and Regulation E where their ATMs lacked posted fee notices. ˇirst, they have argued that conformity with a federally-promulgated compliance manual requiring the fee notice to be posted on the machine or alternatively, on the screen, rather than in both locations allowed them to raise a good faith reliance defense and avoid liability. Second, they have sought a safe harbor from liability where the evidence establishes that someone other than the operator or its employees removed, damaged or altered a properly-posted fee notice or when, despite best efforts to employ reasonable maintenance procedures, the posted fee notice is missing. Third, they have attempted to defeat ATM class actions through the use of Rule 68 offers of judgment. 2. Good Faith Reliance Defense Although the EˇTA and Regulation E state that ATM operators must provide both a posted fee notice and a screen fee notice, a manual promulgated by the ˇederal Deposit Insurance Corporation (ˇDIC) prior to 2009 stated that ATM operators needed only to provide one fee notice. This allowed ATM operators to raise a good faith defense in some cases where the posted fee notice was missing. The ˇDIC s Compliance Examination Manual 25 was designed to be used as a reference tool by its examiners for compliance with applicable federal laws and regulations, including compliance with the requirements of the ATM fee notice provisions of the EˇTA and Regulation E. The edition of the Manual issued in 2006 provided in relevant part: [T]the operator of the ATM must disclose the fact that a fee will be charged for providing EˇT services or a balance inquiry, AND the amount of the fee. The ATM operator may post this information in [a] prominent and conspicuous location on or at the ATM. Alternatively, the operator may provide the notice on an ATM 25. ˇDIC Compliance Examination Manual (2009 and 2011 updates), available at compliance/manual/index_pdf.html [hereinafter the Manual].

4 426 QUARTERLY REPORT screen or on paper, before the consumer is obligated to pay a fee. 26 Thus, while this edition of the Manual was in effect, ATM operators argued that they could rely on this statement by the ˇDIC in good faith to avoid liability where they provided a screen fee notice but not a posted fee notice. ˇor example, in Dover v. Union & Loan Savings Bank, 27 the court considered whether a bank s good faith compliance with the 2006 Manual relieved the bank from civil liability. The court noted that the EˇTA assigns compliance enforcement to the ˇDIC in the case of a state-chartered bank that is insured by the ˇDIC but is not a member bank of the ˇederal Reserve System. 28 The Dover court stated that, under the 2006 Manual, the inclusion of the word alternatively significantly changed the notice requirements which an ATM operator must comply with when compared to the specific language of Regulation E. 29 Instead of clearly requiring both an on the machine notice and a screen or paper notice consistent with Regulation E, the language of the Manual gave the ATM operator the choice of either posting the fee notice on the ATM or providing it on the screen or in paper form. 30 Importantly, the Dover court noted that, under the EˇTA, liability is not imposed in those cases where the bank has acted in good faith in conformity with any inspection by an official or employee of the ˇederal Reserve System duly authorized by the [ˇederal Reserve] Board to issue such interpretations or approvals. 31 The court held that: the ATM operator was entitled to the good faith defense because it complied with the Manual issued by the ˇDIC by providing a screen fee notice; the ˇDIC has the statutory responsibility to conduct compliance examinations; and the EˇTA specifically delegates enforcement of its provisions with respect to nonmember banks to the ˇDIC. 32 However, the ˇDIC revised its Manual in 2009 to comply with Regulation E (2009 Manual), clarifying that an ATM operator that charges a fee must disclose the amount: both (1) in a prominent and conspicuous location on or at the machine; and (2) on the screen or on a paper notice before the consumer is committed to paying a fee. 33 Courts have recognized that the good faith defense under the 2006 Manual is no longer available for transactions that took place after the 2009 Manual went into effect. ˇor example, in Dragotta v. West View Savings Bank, 34 the court considered an ATM transaction made in May, 2009 where no notice was posted on the ATM to inform customers that a fee could be charged. In deciding whether the bank was liable for damages, the court stated that, under the 2006 Manual, which was in effect at the time of the transaction, the ATM operator fully complied with the EˇTA and Regulation E by either posting a fee notice or providing it on the screen. 35 However, noting the June 2009 Manual, the court stated that under the clear language of the [2009 Manual], an ATM operator is now expressly required to provide both notice on or at the machine and on the screen. 36 The court went on to state, [g]one is any suggestion by the ˇDIC that compliance can be effectuated by using one of either types of the two notices as acceptable alternatives. 37 Therefore, while notice on the screen of the ATM was sufficient under the 2006 Manual, the court clearly stated that, after June 2009, the 2009 Manual applies and both types of fee notices are required to comply with the EˇTA and Regulation E. 3. Removal by Third Person Defense In recognition of the fact that ATMs are often placed outdoors and in other public places away from the watchful eye of ATM operator employees, and thus are a target for tampering, the EˇTA provides that ATM operators will not be held liable for damages where the required notice was posted by the operator in compliance with the statute and the notice is subsequently removed, damaged, or altered by an person other than the operator of the automated teller machine. 38 However, it has been held that, to seek this safe harbor, there must be evidence that the notice was in fact removed, damaged or altered by a person other than the operator of the machine. This may prove to be problematic for ATM operators that do not have constant surveillance of their machines. Thus, in Boecherer v. Burling Bank, 39 a consumer alleged that the bank failed to post a notice on one of its ATMs disclosing that it charged a fee to certain users. In its motion for summary judgment, the bank argued that, while no notice was posted on the machine, it was excused from liability under EˇTA section 1693h(d) because the evidence established that it properly posted and did not subsequently remove the posted fee notices. 40 The plaintiff responded that the bank produced no evidence that someone outside the bank removed the fee notices that the bank asserted it posted. 41 ˇurther, the plaintiff pointed to undisputed testimony that the bank used tape to affix the notices and that notices were found 26. See Dragotta v. West View Savings Bank, No. 2:09-cv-627, 2009 WL , at *2 (W.D. Pa. Oct. 16, 2009) (citing ˇDIC Manual (June 2006), at VI-2.8). 27. No. 2:09-cv-708, 2009 WL (W.D. Pa. Aug. 24, 2009). 28. Id. at * Id. at * Id. 31. Id. at *6 (citing 15 U.S.C. 1693m(d)(1)). 32. Id. 33. ˇDIC, 2009 Manual, supra note 25, at VI No. 2:09-cv-627, 2009 WL (W.D. Pa. Oct. 16, 2009), vac. mem., 395 ˇed. Appx. 828, No (3d Cir. Sept. 28, 2010). 35. Id. at * Id. at * Id U.S.C. 1693h(d). 39. No. 08-cv-1332, 2009 WL (N.D. Ill. Dec. 1, 2009). 40. Id. at *15 (citing 15 U.S.C. 1693h(d)). 41. Id.

5 QUARTERLY REPORT 427 on the floor in front of the ATM by bank employees on several occasions. 42 The bank replied that to require specific proof of third-party interference with the fee notice would require an ATM operator to monitor its ATM 24 hours a day, 365 days a year in order to prove that a third party removed the fee notice. 43 The court denied the bank s motion for summary judgment because, given the testimony, it was possible that the sign fell off the machine on its own, and moreover, the bank failed to point to any specific competent evidence that the notice was removed, damaged or altered by any person other than the operator of the machine. 44 Thus, as this case suggests, more definite proof that a third person was in fact responsible for the ATM operator s noncompliance with the EˇTA may be required in order to avoid liability under section 1693h(d). 4. Reasonable Maintenance Procedures Defense If an ATM operator is unable to establish that a third person removed, damaged, or altered a properly-posted fee notice to meet the requirements of section 1693h(d), it may still be able to avoid liability under section 1693m(c), which provides: [A] person may not be held liable for failure to post a fee notice if the person shows by preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding maintenance of procedures reasonably adopted to avoid any such error. 45 After its argument under section 1693h(d) proved to be unavailing, the bank in Boecherer argued that it created and posted the required notices, 42. Id. 43. Id. at * Id U.S.C. 1693m(c). and it was the bank s practice to periodically examine the ATMs to ensure compliance with federal regulations. 46 Additionally, the bank retained a contractor to audit the bank s compliance with the federal regulations. 47 The court found that a trier or fact could determine that, despite the testimony that the bank periodically examined the machine, the fact that the bank used tape to affix the notice, rather than a more permanent adhesive, was unreasonable. 48 ˇurthermore, the bank s reliance on the contractor s periodic examination of the ATMs was insufficient to invoke the defense because the checklist it used stated that a notice is provided either by posting it on the ATM or by providing it on the screen, which did not comply with the statutory fee notice requirements. 49 Therefore, the court concluded that a genuine issue of material fact existed as to whether the bank maintained procedures reasonably adopted to avoid the posted fee notice being missing from the machine. 50 While the regulations do not provide for the manner and method by which the notices must be affixed to the machine, this case suggests that a more permanent means may be necessary to establish compliance. 5. Offer of Judgment Defense Most ATMs will have thousands of fund transfers or balance inquiries during the course of the one-year statute of limitations period 51 prior to the filing of an EˇTA suit for a missing posted fee notice. Accordingly, class actions are typically used as the vehicle to raise an EˇTA claim because the potential amount of statutory damages recoverable, up to $500,000, is much greater than the WL at *18-19 (N.D. Ill. Dec. 1, 2009). 47. Id. at * Id. at * Id. 50. Id. at * U.S.C. 1693m(g). $100 to $1,000 allowed for an individual claim. This has led some ATM operator defendants to attempt to derail purported class actions through use of an offer of judgment under ˇederal Rule 68. Under the Rule, a party can submit an offer to allow judgment on specified terms, with the costs then accrued, and the offer can be accepted within fourteen days. 52 If the offer is not accepted within that period of time, it is considered withdrawn. 53 In the context of a class action, the issue is whether a tender of all of the relief the named plaintiff can recover on his or her individual claim will render those claims moot, thus depriving the court of subject matter jurisdiction over an actual controversy. 54 This will depend on the procedural posture of the case, and what rule of law is applied by a particular federal circuit court of appeals. If the plaintiff has sought certification of a class, the cases clearly hold that merely offering individual relief does not moot the case since less than the complete relief sought has been offered. 55 If, on the other hand, the offer of judgment is made before a class certification motion has been filed, some courts find that the named plaintiff s claim is moot. 56 This is because litigants must have a personal interest in the case at the beginning of the litigation that continues throughout the entirety of the case. 57 When the defendant offers to satisfy the plaintiff s entire demand, there is no dispute over which to litigate and the plaintiff loses outright because the 52. ˇed. R. Civ. P. 68(a), as amended effective Dec. 1, ˇed. R. Civ. P. 68(b). 54. See SEC v. Medical Comm. for Human Rights, 473 U.S. 1, 105 S.Ct. 3012, 87 L. Ed. 2d 1 (1985). See generally Eugene J. Kelley, Jr., John L. Ropiequet, Anna-Katrina S. Christakis & Andrea J. Durkin, Offers of Judgment in Class Action Cases: Do Defendants Have a Secret Weapon?, 54 Consumer ˇin. L.Q. Rep. 183 (2000) [hereinafter Offers of Judgment]. 55. See, e.g., Susman v. Lincoln American Corp., 587 ˇ.2d 866 (7th Cir. 1978); see also Offers of Judgment, supra note 54, at Holstein v. City of Chicago, 29 ˇ.3d 1145, 1147 (7th Cir. 1994). 57. Id.

6 428 QUARTERLY REPORT claim is moot. 58 Thus, [y]ou cannot persist in suing after you ve won. 59 But, other courts may allow the plaintiff to seek class certification after an offer of judgment is served under some circumstances, holding that the motion will relate-back to filing of the complaint. 60 Under such case authority, the representative plaintiff does not need to hasten to file a motion for class certification before the fourteen-day period of the offer of judgment expires. 61 Instead, the plaintiff only needs to seek class certification without undue delay in filing a motion. 62 This is so because of concerns that, otherwise, the defendant could pick off named plaintiffs by mooting their claim, leaving the members of the class with no one to represent their nascent claims. 63 Thus, an unaccepted offer of judgment which is tendered before the court can reasonably be expected to rule on the class certification motion will not operate to prevent class certification. 64 Offers of judgment by ATM operator defendants resulted in the dismissal of four purported EˇTA class actions filed by the same plaintiff within one week 58. Id. (citing Rand v. Monsanto Co., 926 ˇ.2d 596, 598 (7th Cir. 1991)). 59. Greisz v. Household Bank, 179 ˇ.3d 1012, 1015 (7th Cir. 1999). This rule has resulted in several cases being dismissed on motion. See, e.g., Martin v. PPP, Inc., No. 10-cv-140, 2010 WL at *2-4 (N.D. Ill. Jun. 25, 2010); Wiskur v. Short Term Loans, LLC, 94 ˇ. Supp. 2d 937, 939 (N.D. Ill. 2000). This rule is also in effect in some state jurisdictions. See, e.g., Barber v. American Airlines, Inc., 241 Ill. 2d 450, (2011) (applying earlier case law on mootness after an offer of settlement and rejecting a pick off exception); Damasco v. Clearwire Corp., No. 10-cv-3063, 10 WL (N.D. Ill. Sept. 2, 2010), aff d, No , 2011 U.S. App. Lexis (7th Cir. Nov. 18, 2011) (applying the Illinois offer of settlement rule to a case following removal to federal court and reaffirming the Seventh Circuit rule). See generally Offers of Judgment, supra note 54, at See, e.g., Weiss v. Regal Collections, 385 ˇ.3d 337, (3d Cir. 2004) (finding the relation-back doctrine applicable on grounds the application of Rule 68 to class representatives is strained and contravenes one of the primary purposes of class actions); Pitts v. Terrible Herbst, Inc., 653 ˇ.3d 1081, (9th Cir. 2011) (following Weiss). 61. ˇiling a motion before the offer of judgment terminates may save a class action claim in a jurisdiction in the Seventh Circuit; see, e.g., Parker v. Risk Management Alternatives, Inc., 204 ˇ.R.D. 113, 115 (N.D. Ill. 2001). 62. Lucero v. Bureau of Collection Recovery, 639 ˇ.3d 1239, (10th Cir. 2011); Weiss, 385 ˇ.3d at Lucero, 639 ˇ.3d at (citing Roper v. Deposit Guaranty Nat l Bank, 445 U.S. 326, , 100 S. Ct. 1166, 63 L. Ed. 2d 427 (1980)). 64. Id. at of each other in the Northern District of Illinois. 65 In each case, the named plaintiff sought statutory damages as well as actual damages on behalf of himself and members of the purported class of ATM users, because the ATMs he withdrew money from each lacked a posted fee notice. Since the plaintiff had not moved for class certification, the defendants each made a Rule 68 offer of judgment which tendered $1,000 or slightly more for statutory damages plus reasonable attorneys fees and costs shortly after filing a responsive pleading. After all of the offers expired or were rejected by plaintiff, each defendant filed a motion to dismiss for lack of subject matter jurisdiction on the ground that the offers had tendered all of the individual relief the plaintiff could obtain under the EˇTA. 66 Each motion was granted. In one of these cases, Stilz v. Standard Bank & Trust Co., 67 the plaintiff argued that an offer of only $1,000 did not cover his claim of actual damages, and therefore did not offer him complete individual relief. The court held that the $2.50 fee that the plaintiff paid could not constitute actual damages since the screen fee notice required the plaintiff to accept the fee before he could complete the transaction. There was therefore no causal connection between the lack of a posted fee notice and actual damages in the form of the fee itself under precedent based on identical class action language in the EˇTA and the TILA. 68 The court 65. Complaint, Stilz v. Standard Bank & Trust Co., No. 10-cv-1996 (N.D. Ill. Mar. 30, 2010); Complaint, Stilz v. Blackstone ATM, LLC, No. 10-cv-1997 (N.D. Ill. Mar. 30, 2010); Complaint, Stilz v. Global Cash Network, Inc., No. 10-cv-1998 (N.D. Ill. Mar. 30, 2010); Complaint, Stilz v. Banco Popular North America, No. 10-cv-2087 (N.D. Ill. Apr. 5, 2010). 66. Motion to dismiss, Standard Bank, supra note 65 (N.D. Ill. Aug. 11, 2010); Motion to dismiss, Blackstone, supra note 65 (N.D. Ill. Aug. 11, 2010); Motion to dismiss, Global Cash, supra note 65 (N.D. Ill. Aug. 11, 2010); Motion to dismiss, Banco Popular, supra note 65 (N.D. Ill. Aug. 11, 2010). 67. No. 10-cv-1996, 2010 U.S. Dist. Lexis (N.D. Ill. Dec. 14, 2010). 68. Id. at *4-5 (citing Brown v. Bank of America, N.A., 457 ˇ. Supp.2d 82, 90 (D. Mass. 2006) (EˇTA and TILA have identical language), and Johnson v. West Suburban Bank, 225 ˇ.3d 366, (3d Cir. 2000) (TILA reliance element)). Accord: Martz v. PNC Bank, N.A., No. 06-cv-1075, 2006 U.S. Dist. Lexis at *14-17 (W.D. Pa. Nov. 30, 2006) (following Brown); Polo v. Goodings Supermarkets, Inc., 232 ˇ.R.D. (Continued in next column) rejected cases which found that no reliance element was required to establish actual damages under the EˇTA, 69 finding cases that followed Brown v. Bank of America 70 better reasoned. 71 The tender of $1,000 therefore offered all the damages the plaintiff could obtain for an EˇTA posted fee notice violation. 72 With respect to whether the offer of judgment mooted the plaintiff s claim, the court applied the Seventh Circuit rule that offering complete individual relief where no motion for class certification is filed before the offer expires moots the claim and requires dismissal, expressly rejecting the relation back theory: Though Plaintiff argues that his motion for class certification should relate back to his complaint, this ignores Rule 68 s nondiscretionary 10-day window during which a party may accept an adverse party s offer of judgment. After the 10-day period expires, if no motion for class certification has been filed, a plaintiff s case is moot. 73 The result was the same in the other three cases. In two of the cases, the plaintiff had made two withdrawals and argued that he was entitled to statutory damages of up to $2,000, so that offers of $1,000 or 68. (Continued from previous column) 399, 408 (M.D. ˇla. 2004) (detrimental reliance required). The corresponding reliance element for actual damages under the TILA was discussed in Eugene J. Kelley, Jr. & John L. Ropiequet, Actual Damages Under the TILA: Collapsing Class Actions, 55 Consumer ˇin. L.Q. Rep. 200 (2001), reprinted in ROHNER & MILLER, TRUTH IN LENDING 12.08[4] (2009 supp.). See generally cases collected in Vallies v. Sky Bank, 591 ˇ.3d 152, 155 (3d Cir. 2009). 69. See: Savrnoch v. ˇirst American Bankcard, Inc., 2007 U.S. Dist. Lexis (E.D. Wis. Oct. 26, 2007); Voeks v. Wal- Mart Stores, 2007 U.S. Dist. Lexis (E.D. Wis. Aug. 17, 2007); Mayotte v. Associated Bank, N.A., 2007 U.S. Dist. Lexis (E.D. Wis. Aug. 17, 2007) ˇ. Supp.2d 82 (D. Mass. 2006). 71. Stilz, 2010 U.S. Dist. Lexis , at *5-11 (citing Voeks v. Pilot Travel Centers, 560 ˇ. Supp.2d 718, 723 (E.D. Wis. 2008); Global Cash, supra note 65, 2010 U.S. Dist. Lexis at *16-17 (N.D. Ill. Oct. 7, 2010)). 72. Id. at * Id. at *13. Although the court did not note the change, Rule 68 was amended effective Dec. 1, 2009 to extend the 10-day period to 14 days. See also Banco Popular, supra note 65, 2010 U.S. Dist. Lexis at *13 (relation-back doctrine is contrary to Seventh Circuit law).

7 QUARTERLY REPORT 429 slightly more did not offer full individual relief. Both courts held that a plaintiff is only entitled to one recovery of statutory damages in an EˇTA case, regardless of the number of transactions involved, so that a tender of $1,000 was sufficient to moot the plaintiff s claim. 74 The third case was also dismissed for failure to file a timely class certification motion after an offer of judgment was made. 75 In Blackburn v. FEDCorp., Inc., 76 however, the court found that an offer of judgment did not moot the representative plaintiff s EˇTA posted fee notice claim, after applying the relation-back doctrine. As in the Stilz cases, the named plaintiff in Blackburn brought a purported EˇTA class action based on a missing posted fee notice. She was offered $1,000 for her statutory damages plus reasonable attorneys fees and expenses under a Rule 68 offer of judgment. The defendant moved to dismiss for lack of subject matter jurisdiction on grounds of mootness after the plaintiff failed to accept the offer or file a motion for class certification. The plaintiff argued that she had not been offered complete relief since she sought injunctive relief and that no relief was offered on the class claims. The court held that no injunctive relief can be granted under the EˇTA, so the offer was not incomplete in that regard. 77 With respect to the class claims, the court noted the Stilz decisions, 78 but decided, in the absence of binding Eleventh Circuit precedent, that it would follow what it discerned to be the rule in the Third and Tenth Circuits, that an offer of judgment must include class relief in order to moot a putative class action. 79 Although the court noted that no class 74. Stilz, 2010 U.S. Dist. Lexis , at *7-8; Global Cash, supra note 65, 2010 U.S. Dist. Lexis at * Blackstone, supra note 65, Order, No. 10-cv-1997 (N.D. Ill. Nov. 4, 2010). 76. No. 10-cv-726, 2011 WL (M.D. Ala. May 11, 2011). 77. Id. at * Id. at * Id. at *10-12 (citing Lucero, 639 ˇ.3d at and Weiss, 385 ˇ.3d 337). certification motion had been filed as of the date of the decision, 80 it appeared that the court felt that the plaintiff should be granted more of an opportunity to file a class certification motion. C. Fee May versus Will Be Charged Theory In attempts to hold ATM operators liable under the EˇTA, earlier class actions focused on whether the specific notice language used by the ATM operator in posted fee notices provided sufficient notice to the customer. At issue in such cases was whether the ATM operators had to post notices stating that a fee will be charged rather than merely notifying customers that a fee may be charged. These cases appear to have vanished following a 2006 amendment to Regulation E. ˇor example, in Brown v. Bank of America, 81 the bank did not charge its own customers for using its ATMs, but did charge non-customers a fee for using the machines. The bank s posted fee notice stated: Bank of America may charge a $1.50 fee. The plaintiff asserted that the bank s use of the word may violated Regulation E, which stated at the time suit was filed in 2005 that a fee notice must state that a fee will be charged, 82 because it did not provide proper notice to the customer of whether a fee would or would not be charged. However, Brown the court noted that an amendment to Regulation E, which went into effect in ˇebruary 2006, provided that an ATM operator can meet the requirements of Regulation E by posting a notice on the machine that a fee may be imposed, but only if there are circumstances under which a fee will not be charged for such services. 83 Because circumstances existed where customers were not charged a fee, i.e., the bank s own customers, the court found that, 80. Id. at * ˇ. Supp.2d 82, 85 (D. Mass 2006). 82. Id. (citing 12 CˇR (b) (2005)). 83. Id. under the 2006 amendment, the bank was not in violation of the EˇTA. 84 The court further found that the amendment could be applied retrospectively to the plaintiff s case since it did not concern a substantive change, but was merely a clarification of existing law. 85 The comments of the ˇederal Reserve Board on the 2006 final rule amending Regulation E stated that use of the word may instead of the word will in the posted fee notice was appropriate since the transaction-specific screen fee notice which calls on the consumer to accept or reject the fee dispels any confusion: The first disclosure, on ATM signage posted on or at the ATM, allows consumers to identify quickly ATMs that generally charge a fee for use. This disclosure is not intended to provide a complete disclosure of the fees associated with the particular type of transaction the consumer seeks to conduct. Until a consumer uses his or her card at an ATM, the ATM operator does not know whether a surcharge will be imposed for that particular consumer. Rather, it is the second, more specific disclosure, made either on the ATM screen or on an ATM receipt, that informs the consumer before he or she is committed to the transaction whether, in fact, a fee will be imposed for the transaction and the amount of the fee. Thus, consumers who are charged a fee would not be adversely affected by a general notice that a fee may be imposed because they will have the opportunity to terminate the transaction after receiving the onscreen notice or receipt containing the transaction-specific disclosure. 86 However, this left open a possible claim that use of the word 84. Id. Accord: Morrissey v. Webster Bank, N.A., 417 ˇ. Supp.2d 183, 187 (D. Mass. 2006). 85. Brown, 457 ˇ. Supp.2d at ˇed. Reg. 1638, 1656 (Jan. 10, 2006).

8 430 QUARTERLY REPORT may instead of will somewhere in the screen fee notice might violate the EˇTA. This issue was addressed by the United States Court of Appeals for the Sixth Circuit in Clemmer v. Key Bank, N.A. 87 The plaintiff brought suit over an ATM where the screen fee notice stated that a consumer may be charged a fee for a non-customer cash advance. He asserted that the screen fee notice must state that a consumer is or will be charged a fee. 88 However, the district court held that using the less definite may with the more definite requirement that a user press yes to accept the fee was sufficient notice. 89 Affirming, the Sixth Circuit agreed that the screen fee notice could say may instead of will where the consumer must also press yes : [B]y stating that he may be charged a fee, and then asking him whether he accepted the fee and wished to proceed, Key Bank effectively notified Clemmer that it would charge him a fee for the transaction. The on-screen message did not state that if he pressed yes he would only be likely, probably, or provisionally accepting the imposition of a fee. The statement is clear and declarative: if Clemmer pressed yes, he accepted that he would have to pay a fee. 90 With the Brown case resolving the may versus will issue for posted fee notices in accordance with the 2006 amendments to Regulation E, and the Clemmer case doing the same for the screen fee notice, litigation raising these issues appears to have disappeared. So long as ATM operators follow what is now prescribed for the language of fee notices in Regulation E, claims asserting that there is an EˇTA violation or a violation of state UDAP law because the wording is misleading 91 likely will be found to be without merit. IV. Conclusion Given the potential exposure of up to $500,000 in statutory damages in class actions under the EˇTA, ATM operators should be aware not only of the statutory fee notice requirements imposed on them, but also of what they must do to qualify for the defenses to EˇTA liability. They should take a close look at how their posted fee notices are secured and what procedures are in place for the employees or contractors who service the machines to detect and replace missing notices. They should preserve evidence of the steps taken. Procedural checklists should follow the most recent manuals issued by banking regulators like the ˇDIC. As the cases have noted, the absence of a posted fee notice results in absolutely no actual injury or damage to consumers since they must affirmatively accept the fee in response to the screen fee notice before any fee can be charged. The redundant posted fee notice serves no useful purpose except to enrich the plaintiff s class action bar. Unfortunately, since posting a fee notice is an affirmative command of the EˇTA, the common sense position taken in the 2006 ˇDIC Compliance Manual, that either form of fee notice is sufficient to notify consumers that a fee will be charged, can no longer be relied on. Thus, unlike the may versus will cases which were resolved by ˇRB rulemaking, only an amendment to the EˇTA which abolishes the posted fee notice requirement will end the ATM fee notice litigation ˇ.3d 349 (6th Cir. 2008). 88. Id. at Id. 90. Id. at The Brown court also granted summary judgment dismissing the claims under Massachusetts and California law that the language, print size and location of the posted fee notice were deficient. 457 ˇ. Supp.2d at 89. Dodd-Frank Act Appraisal (Continued from page 338) III. recruiting, selecting, or retaining a person to prepare a valuation; contracting with or employing a person to prepare a valuation; managing or overseeing the process of preparing a valuation, including by providing administrative services such as receiving orders for and receiving a valuation, submitting a completed valuation to creditors and underwriters, collecting fees from creditors and underwriters for services provided in connection with a valuation, and compensating a person that prepares valuations; or reviewing or verifying the work of a person that prepares valuations. Valuation of a Consumer s Principal Dwelling A. Prohibition Against Coercion The Interim Rule provides that, in connection with a covered transaction, no covered person may or attempt to directly or indirectly cause the value assigned to the consumer s principal dwelling to be based on any factor other than the independent judgment of a person that prepares valuations, through coercion, extortion, inducement, bribery, or intimidation of, compensation or instruction to, or collusion with a person that prepares valuations or performs valuation management functions. The Interim Rule provides the following as non-exclusive examples of actions that violate the foregoing prohibition: seeking to influence a person that prepares a valuation to report a minimum or maximum value for the consumer s principal dwelling; withholding or threatening to withhold timely payment to a person that prepares a valuation or performs valuation management functions because the person does not value the consumer s principal dwelling at or above a certain amount; implying to a person that prepares valuations that current or future retention of the person depends on the amount at which the person estimates the value of the consumer s principal dwelling; excluding a person that prepares a valuation from consideration for future engagement because the person reports a value for the consumer s principal dwelling that does not meet or exceed a predetermined threshold; and conditioning the compensation paid to a person that prepares a valuation on consummation of the covered transaction. B. Prohibition Against Mischaracterization of Value (Continued on page 445)