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The basic purpose of the McFadden Act, as previously noted, was to create a competitive equality between national and state banks. Ironically, the District Court's opinion would violate this purpose by again placing national banks at a substantial disadvantage. If ATMs merely used by a national bank's customers are McFadden Act branches, that use is subject to an interstate banking prohibition, substantial capital requirements and also intrastate geographic limitations imposed by state law. By contrast, as a result of specialized electronic-funds-transfer legislation that many states have enacted, the customers of state banks would be substantially freer to use ATMs even on an interstate basis. This would provide a sig. nificant advantage to state banks since banking customers increasingly demand convenient and modern bank services. Indeed, the availability of ATM services is an important factor in a customer's choice of bank.


A. Many States Permit State Banks to Establish ATMs

Not Subject to Any Geographic Restrictions In recent years, many states have enacted special “electronic-funds-transfer" legislation to promote the development of ATMs established by state banks. As a result of this legislation, many states now authorize state banks to establish ATMs that are not regulated as branches. National banks would be at a substantial disadvantage if their use of shared ATMs is subject to geographic restrictions.

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30 For both state and national banks, the convenience of ATM services has become an important factor in their ability to attract and maintain banking customers. See, e.g., Geogruphic Restrictions on Commercial Bunking The Report of the President, Dept of the Treasury at 30 (Jan. 1981); "EFT in the United States, " The Final Report of the National Commission on Electronic Fund Transfers at 103-15 (Oct. 28, 1977); V. M. Bennett and D. Sabbarese “Shared ATM Networks: The Nation and the Southeast." Ec. Rev. at 34 (Dec. 1982).



At present, approximately twenty-three states have enacted legislation that provides that state bank ATMs are not branches. In these states, state banks are generally able to establish ATMs without geographical restriction. Several states (approximately eighteen) have also enacted legislation that permits the use of ATMs within the state by state banks located in other states. Thus these states permit even interstate banking, through the use of ATMs, by state banks. National banks would be substantially disadvantaged in these states, if the mere use of an ATM by a national bank is considered to be a branch activity under the McFadden Act.


B. Some States Permit State Banks to Establish ATMs

Not Subject to Any Capital Requirements In the states in which state bank ATMs are not “branches'' as a matter of state law, those ATMs are generally not subject to any capital requirements beyond those already applicable to the bank's main office. By contrast, if a national bank's mere use of an ATM is a branch under the McFadden Act, the national bank's capital requirements might significantly multiply by the total number of ATMs in any network in which that bank is participating-even if that bank's customers did not actually use each ATM in the network. This would be an extreme and unfair result.

31 Those states are Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, lowa, Kansas, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, New Hampshire, North Carolina, North Dakota, Oklahoma, Rhode Island, South Dakota, Texas, Washington, West Virginia and Wisconsin. See D.I. Baker & N. Penney, The Law of Electronic Fund Transfer Systems, fi 22.0112) at n. 44 (Supp. 1983, D.I. Baker & R.E. Brandel).

32 See D.I. Baker & N. Penney, The Law of Electronic Fund Transfer Systems, 1 22.01 12) at n.41 (Supp. 1983, D.I. Baker & R.E. Brandel).


C. Other Financial Institutions Are Permitted to Estab

lish ATMs Not Subject to Geographic Restrictions If a national bank's mere use of an ATM were to be considered a branch activity, national banks would be at a competitive disadvantage not only to state banks, but also to other national banking institutions. For example, since August 1981, federal savings and loan associations have been authorized by the Federal Home Loan Bank Board.?? to establish ATMs (referred to as “remote service units” or “RSUs”) anywhere in the United States on an unrestricted geographic basis." See 12 C.F.R. § 545.4-2.


33 The Federal Home Loan Bank Board's August 1981 regulation, quoted above, was promulgated pursuant to 12 U.S.C. $ 1464(b)(1), as amended by the Depository Institutions Deregulation and Monetary Control Act of 1980.



For the foregoing reasons, MasterCard submits that the District Court's judgment and order should be reversed. Without giving consideration to the full three-part definition of branch in IBAA, the District Court rendered an opinion that, unless reversed, will have a significant and harmful impact on the ability of national banks to participate in national and regional shared ATM networks. The District Court's opinion did not even consider this consequence. It is a result that clearly contradicts the basic purpose of the McFadden Act.

Respectfully submitted,


919 Third Avenue
New York, New York 10022

(212) 371-6000 Of counsel:




Dear Ms.

This is in response to your memorandum dated March 25, 1977, concerning the

Inc., holding company arrangement which enables affiliated national bank customers to access on-premise and off-premise CBCTs owned by affiliated state banks. In that regard, you were advised that

N.A., N.A., and

N.A., individually own and operate CBCTs that were established on existing bank premises. Authorized customers of those banks may make cash withdrawals from their accounts at any CBCT owned by any of those banks or state chartered affiliate banks located in Duval and St. Johns counties. Four of the state bank CBCTs are remote facilities. The bank whose customer initiated the transaction will pay the bank that owns the terminal a $.75 fee for each transaction.

The question raised in this inquiry is whether national banks must submit CBCT branch applications for those terminals they access on a transactional fee basis.

In my opinion, CBCT terminals accessed by national banks on a transactional fee basis are not national bank branches; therefore, no CBCT branch applications must be submitted.

The leading case on this subject is IBAA v. Smith, 534 F.2d 921 (D.C. Cir. 1976), cert. denied, 45 U.S.L.W. 3239 (1976). The circuit court of Appeals of the District of Columbia concluded that a CBCT which receives or disburses funds is a branch of a national bank within the meaning of 12 U.S.C.

a 36(f) if both of the following facts exist:

(1) The facility is established (i.e., owned or rented) by a national bank, and (2) it offers the bank's customers a convenience that gives the bank a competitive advantage over the other banks (national or state) that do not operate similar facilities.


534 F.2d at 951-52.

If, as in the present case, the accessing national banks only pay for the performance of bank services rather than for a

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