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How to be a bank fee vigilante

By Claes Bell, CFA · Bankrate.com
Tuesday, May 24, 2011
Posted: 7 am ET

I'm always a little surprised by how passionately people hate banks' ATM fees. Sure, they're annoying, but they're far from the sometimes financially devastating penalties that can come from overdrawing your checking account, for example.

But as you may have heard, some people are taking their ATM-fee hatred to a whole new level. From a story last month by Tresa Baldas at the Detroit Free Press:

Retirees Nancy Kinder and Ray Harrison have filed a wave of lawsuits in federal courts in Michigan -- five of them in one day this week -- over ATM fees that banks charge to non-customers.

Their lawsuits say the banks failed to post notices outside the ATM alerting non-customers about the fees, as required by a 10-year-old federal law.

The law says an on-screen notification isn't enough. A physical sign also is required.

No bank has duped Kinder and Harrison. In fact, they're combing the state by car, looking for ATMs that don't have the notification sign, records show. When they spot one, they make a withdrawal, take a picture of the ATM, and then it's off to court.

It's not a novel tactic.

Nationwide, a cottage industry of plaintiffs firms have spawned a flurry of ATM fee lawsuits, which also have popped up in California, Illinois and Texas. The suits have triggered settlements ranging from tens of thousands of dollars to $2.5 million. ATM fees for non-customers are generally $2 or $3.

The story goes on to find the couple justifying their nuisance lawsuits by saying they'll donate the proceeds to charity:

"This law is absolutely clear and has been on the books for 10 years," said attorney Geoffrey Bestor, who is representing the Fowlerville couple. "Nancy Kinder and Ray Harrison are a retired couple who feel strongly that banks ought to follow the law."

Bestor said his clients aren't making much money from the cases. He said they receive $1,000 or $2,000 per case, if it's successful.

He also said they've donated $100,000 from the ATM suits -- some not yet finalized -- to charity, and that number will grow close to $200,000 by the end of the year.

I get that seeing banks hit by nuisance lawsuits might provide some schadenfreude for some, but to me, filing a million-dollar lawsuit over not putting up a physical sign to go along with the ubiquitous on-screen fee warning seems kind of idiotic.

Sorry, but doing the following does not make you a hero to consumers everywhere:

  1. Find a technically correct but meaningless breach of banking law so obscure that even banks' compliance departments don't bother to follow it.
  2. Go around finding instances of said meaningless breach in community banks and credit unions who are probably nicer to their customers overall than larger institutions and sue them.
  3. Repeat.

I'm all for suing a bank or credit union if they're really hurting consumers and breaking the law, especially if regulators are failing to act. But what difference does it make if there's a physical reminder of the ATM fee to go along with the on-screen version? These lawsuits will probably end up as a net negative for bank customers, as they'll likely be forced to pay higher bank fees to cover the legal costs.

My point is, if you really want to be a fee vigilante and help consumers, go after a fee that actually hurts people, rather than a ticky-tack disclosure issue that in the scheme of things, doesn't matter.

What do you think? Is this couple helping or hurting consumers? Would you sue a bank over the lack of a physical sign disclosing ATM fees?

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5 Comments
Charles
May 30, 2011 at 6:44 pm

Umm, The fact that the tax payers helped the bank bail-out are paying 20-30% over what the banks borrow money from the fed is usury. Makes the Sapranos look honest. It's a big win for the IRS since they can tax it Twice! Welcome to the suck...
Bury you own!

Douglas
May 25, 2011 at 2:03 pm

I wouldn't sue, unless the bank failed to comply after notification. A rule is a rule, no matter how silly. What other rules is the general public unaware of but the banks aren't following? Who's ensuring that the banks are following other rules that "matter?" Who decides what rules matter enough to follow or not?

A touring band will include in the contract to have a bowl of M&M's in the dressing room, with all the brown ones removed. Not for hatred of brown M&M's, but serves to test if the venue is paying attention to other details in the contract.

Homeless
May 25, 2011 at 9:47 am

Let's not also forget the court costs that are paid by taxpayers. So in an attempt to screw over the banks, these people are instead, screwing over bank customers and non-customers as well as taxpayers. The cases should be thrown out by the court and the lawyers should be disbarred for filing frivolous lawsuits. There are REAL, IMPORTANT cases out there, that get pushed back because of ridiculous things like this.