We have recently observed a sharp increase in lawsuits filed against businesses housing automated teller machines (ATMs), including restaurants, retail establishments and sports venues. While only ATM operators are liable under the Electronic Funds Transfer Act (EFTA), plaintiffs continue to sue any business that merely has an ATM on their property. The lawsuits, filed as class actions, allege that the EFTA, 15 U.S.C. § 1693 et seq., requires that all ATMs have posted physically on the machine a notice that a fee is imposed. The lawsuits allege that this notice must be in addition to the on-screen notices provided to users of the ATMs. Even though the plaintiffs received on-screen notices of the fees charged, and expressly agreed to those fees, they seek actual and statutory damages, as well as attorneys’ fees and costs. One such case filed in Wisconsin settled for $2.1 million and another case settled in Ohio for $470,0001. Other defendants have successfully obtained early dismissals. The problem faced by many litigants is the paucity of case law regarding ETFA claims. Notwithstanding the increased number of filings and settlements, it's unclear whether the ETFA actually requires notice both on the ATM and on-screen. In the past, the Federal Deposit Insurance Corporation's (FDIC) Compliance Examination Handbook has only required one form of notice and the language of the ETFA does not contain a conjunctive term expressly requiring both forms of notice2. One court has recently observed that “on-screen prompts are enough warning for the average consumer that the ATM will charge a transaction fee3.” Of course, businesses are well advised to proceed as if the ETFA requires both forms of notice.
Regardless of how many forms of notice are required, courts have recognized that EFTA claims are unsuitable for class action treatment4. Further, to recover actual damages, a plaintiff must allege causation and detrimental reliance. Consequently, actual damages are unavailable in class actions5. This is another reason why these claims are unsuitable for class treatment. In addition to challenging the class action status of these cases, the ETFA also provides defendants with statutory defenses for bona fide or unintentional errors and good faith compliance.
For any business with an ATM on its property, the best way to mitigate against the risk of these lawsuits is to have an agreement with the ATM operator that expressly places the responsibility for regulatory compliance on the ATM operator and provides for indemnification in the event that the business is sued. To mitigate their risks, ATM operators must develop a regulatory compliance plan, implement the plan immediately, and continuously document the adherence to the plan. All businesses should confirm that all ATMs on their property bear the appropriate notice stickers and should document the existence of the stickers with photographic evidence. A policy requiring periodic inspections to ensure that the notice stickers remain affixed to the ATMs should also be adopted and implemented. Courts have dismissed claims where an ATM operator has submitted affidavits and photographs showing that a notice was on the ATM at one time6. Consult legal counsel for an appropriate compliance program and to ensure an appropriate indemnification agreement exists.
Despite the very real threat of these lawsuits, there exist strong arguments for immediate dismissal available to businesses sued under the ETFA. Whether the claim is brought as an individual action or as a class action will guide the defense strategy. In combination with motions to dismiss, one effective strategy is to challenge the lawsuit as being brought in bad faith under 15 U.S.C. § 1693m(f), which awards successful defendants their attorneys’ fees and costs. Given the authority denying class action status, especially claims for actual damages, filing an ETFA claim as a class action and seeking actual damages may very well constitute bad faith justifying the recovery of attorneys’ fees and costs to the defendant.