SAN FRANCISCO -- A movement by cities to try to stop banks from surcharging non-account holders who use their automated teller machines has been dealt a legal setback.
Saying the laws will likely fail in court, U.S. District Judge Vaughn Walker on Monday granted a preliminary injunction to Wells Fargo and Bank of America, which sued to block enforcement of bans on certain ATM fees in Santa Monica and San Francisco."It doesn't make any sense to have a system where there are different fees all over the country," U.S. District Judge Vaughn Walker said Monday. He said he believes local governments are barred by federal law from regulating the ATM fees.
Walker ordered Wells Fargo and Bank of America to divert the disputed fees into escrow accounts so that they can be returned to ATM users in the event that the cities of Santa Monica and San Francisco prevail.
Lawyers for both cities said they will turn to the 9th U.S. Circuit Court of Appeals, which ruled in 1990 that the regulation of bank ATMs is not limited to the federal government. They said they are on solid legal ground.
"More than two dozen cities and counties have contacted me personally expressing a strong interest in enacting a surcharge ban," said Adam Radinsky, Santa Monica's deputy city attorney. "We don't believe the ruling in any way affects the ability of other municipalities to impose a ban."
California Bankers Association spokesman John Stafford said the banks were pleased the judge granted their request for a preliminary injunction, and that they would comply with the escrow order.
Radinsky said smaller banks, including First Federal and Washington Mutual, stopped charging the non-account holder fees after the ban passed by the Santa Monica City Council took effect Nov. 11.
Wells Fargo and Bank of America, which controls 86 percent of the ATMs in the two cities, sued instead. They also closed their ATMs in Santa Monica to non-account holders. Bank of America closed its ATMs in San Francisco to non-account holders. The ban, which was approved by two-thirds of the voters, is to take effect in December.