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I am writing to urge you to support s.2898, Senator Trible's Banking Convenience Act of 1984, a bill on which your Committee has scheduled hearings for Wednesday and Thursday, September 19 and 20. As President of Plus System, Inc. ("PSI"), the most extensive shared automated teller machine ("ATM") network in the country, I am convinced that this legislation is necessary to reverse the possible effects of a recent and erroneous federal district court decision; more importantly, it is needed in order to preserve the unprecedented consumer benefits of the PLUS SYSTEM network electronic access to the consumer's depository account wherever he or she travels throughout the country. Perhaps more than any other interested party, Plus System, Inc. is vitally affected by this bill and the court case that spawned it: owned by 34 financial institutions, including First Security Corporation, our company has over 1,000 member financial institutions in 47 states who share and allow their 23 million cardholders to use 3,300 ATMs. Formed in 1981 for the sole purpose of developing and operating this network, PSI in this short time has enabled its member banks to offer their customers convenient, reliable, low cost, and accurate electronic access to their accounts.
These consumer benefits, developed by PSI members at a cost of tens of millions of dollars, are now threatened by the erroneous April 1984 Federal District Court decision of IBAA V. Marine Midland Bank. That court apparently held that a national bank engages in "branch banking" when its customer merely uses an ATM owned by another institution. Although the decision is squarely contrary to long-standing lower and appellate court decisions as well as Comptroller of the Currency regulations and interpretations, it introduces so much uncertainty that legislative action is warranted.
PLUS SYSTEM, INC. Post Office Box 5060 • Denver, CO 80217 • 303/629-7755
S. 2898 precisely and narrowly corrects that decision by codifying the Comptroller's rules and interpretations on sharing of ATMs by national banks; proposed amendments that do more than this confuse and complicate a simple issue. With this legislation, the PLUS SYSTEM network can continue to provide efficient, reliable, and convenient account access to the 23 million cardholders of the 1,000 PSI member financial institutions. Combined with a conclusive judicial decision in Marine Midland and revised Comptroller regulations, the failure to adopt s.2898 would have devasting effects: (1) national banks, including the 400 that are PSI members, no longer could share their ATMs across states lines; (2) traveling consumers holding PLUS SYSTEM cards from national banks would be deprived of the speed, convenience, and reliability of national electronic access to their accounts; (3) the loss of national banks might so undermine PSI scale economies or reduce numbers of ATMs that the entire network may no longer be viable; (4) the competitive balance between national and state banks could be seriously undermined because national banks could not share terminals across state lines, yet there would be no similar restriction on state banks, S & Ls, or credit unions; (5) PSI members risk the loss of tens of millions of dollars that were invested in the network in reliance upon ten years of federal court decisions and Comptroller policy; (6) the uncertainty caused by Marine Midland will discourage PSI and financial institutions, particularly national banks, from investing further in shared ATMs systems and its technology, thereby depriving consumers of more efficient and convenient products and services; and (7) smaller financial institutions who are now members of PSI will be disproportionately hurt because they will lose the very benefits of a national ATM system that permit them to compete effectively against larger institutions.
PSI's position is more fully set forth in formal comments we have this day filed with the Senate Banking Committee.
Thank you for your consideration.
D. Dale Browning
Senator GORTON. Mrs. Cottrell.
STATEMENT OF MARY-PAT COTTRELL, VICE PRESIDENT, CITY.
Mr. Chairman and members of the Committee, my name is
I am Vice President of Corporate Financial
Services at CityTrust in Bridgeport, Connecticut.
I am also the
Chairman of the Board of Directors of the Electronic Funds
Transfer Association, in which capacity I
am testifying today.
am accompanied by Henry polmer, a partner in the law firm of
Bell, Boyd & Lloyd.
Mr. Polmer, who was the Deputy General
Counsel of the National Commission on Electronic Fund Transfers,
is the General Counsel of the EFT Association.
The Electronic Funds Transfer Association was
founded in 1977, just as a congressionally-created National
Commission on Electronic Fund Transfers was concluding its two
The EFT Association was created as
an ongoing forum
to promote the intelligent evolution of electronic funds transfer
("EFT"), and stands today as the only national, multi-industry
organization committed to addressing the broad range of issues
affecting the development and implementation of automated
Association members include state and
national, large and small commercial banks, savings and loan
associations, mutual savings banks, credit unions and various
nondepository financial institutions as well as general
merchandise retailers, discount merchandisers, data processors,
equipment and software manufacturers, telecommunications
companies and many shared EFT networks.
The EFT Association's
concerns span a spectrum from government affairs to the
development of technical industry standards.
We are pleased to appear before this Committee to
express the views of our broad-based membership with regard to a
very narrow issue with extremely broad implications
shared use of EFT terminals.
Our role as
a forum for the EFT
ideas of every commercial group usually precludes our promoting any one group's legislative proposals which may be at odds with
the interests of other member groups.
Diversity in the EFT
Association is not merely a mixture of small institutions and
is the gathering and exchange of information and most importantly
the analysis of EFT issues and their alternative solutions.
the EFT Association takes a public position, as we will today, we
do so only after attempting to ensure that it represents
consensus of opinion within the EFT community.
Mr. Chairman, there is a very broad concensus within
the EFT community today that the decision in the lawsuit filed by
the Independent Bankers Association of New York State against
Marine Midland Bank and Wegmans Food Markets could, if upheld by
the Second Circuit Court of Appeals, represent an unmitigated
disaster for the entire retail EFT industry.
As you know, the
district court opinion held that an automated teller machine, or
ATM, that was established, owned and onerated by a Wegmans Food
Market and made available for use by the customers of Marine
Midland Bank and many other state and national banks on
transaction fee basis, became a branch of Marine Midland even
though Marine Midland neither owned nor rented the machine.
the mere use of an EFT terminal by the customers of a national
bank which neither owns
nor rents it renders the terminal a
branch of the national bank, then such sharing across state
boundaries constitutes interstate branching and thousands of
national banks all across the United States have been unknowingly
engaged in unlawful branch banking for a very long time by
participating in the interstate sharing of ATMS.
If these shared
EFT systems are forced to stop operating, the enormous investment
in them could practically overnight become a gigantic waste of
designed to deal in a straight-forward manner with the threat
that the Wegman's litigation poses to the immediate and long-term
existence of retail electronic funds transfer, and the Electronic
Funds Transfer Association applauds Senators Trible and Humphrey
for introducing s. 2898, which is a straight-forward solution
not to the long-term problems and general inequities which exist
in the financial industry
but to the specific impending
disaster posed by the Wegman's litigation.
The Electronic Funds
Transfer Association supports S. 2898, and we will have more
say about it later in our testimony.
First, however, I would
like to discuss the background and development of EFT terminal
sharing to give your Committee the perspective necessary to fully
understand the current crisis.