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in which it is located, (its "home state"), if (i) the other state

by statute specifically authorizes state banks situated in the

bank's home state to establish a branch in the other state, and (ii)

the national bank's home state specifically authorizes by statute a home state bank to establish and operate a branch in the other state.

CSBS believes that this section would contemplate participation by

national banks in interstate shared ATM networks to the same extent

allowed to state banks.

We remain unconvinced, therefore, that any further legislative

action is required at this time.

Clarification that state ATM laws

which create a different class of facility for purposes of branch

ing laws apply equally to state and national banks, however, may be


It is incorrect to say that shared ATMs were not treated as

branches prior to the district court decision in the Marine Midland


ATMs have consistently been treated as branches.


Comptroller, by regulation, sought to distinguish shared ATMs from

proprietary ATMs.

The Marine Midland case was the first test of

an ATM located pursuant to that regulation inconsistent with per

tinent state law.

The premise underlying the Comptroller's regula

tion, that shared ATMs could be treated as other than branches of

national banks, was rejected.

Moreover, it is not true that many

ATMs have been placed without regard to branching restrictions and

must be treated as illegal branches, since those which we surveyed were in compliance with state ATM laws, which are exceptions to the branching laws equally applicable to state and national banks. Again, Section 1002 of s. 2851 solves the limited problem of participation in interstate shared ATM networks.

S. 2898

s. 2898, as introduced, would preempt all pertinent state law. as to national banks, by creating an absolute exception to the

McFadden Act for all shared ATM networks.

It would allow full

interstate banking activities, including deposit-taking, without

regard for either restrictions on bank or bank branch location

and activities or state ATM laws.

It would allow national banks

to do anything they pleased wherever they pleased, so long as they

do not establish, own or rent that machine.

Under its provisions,

large institutions could evade all pertinent limitations on their

operations through any of several contractual arrangements in which

transactional fees were assessed.

Electronic banking likely would

become little more than a highly centralized franchise operation.

To this end, upon request, CSBS put forward several suggested

changes in s. 2898 to maintain current levels of state authority,

by letter dated August 10, 1984, addressed to a staff member of

Senator Trible.

The following changes were suggested:


at the end of section (i) (1), strike the period
and add the following:

"if such automated device is otherwise es-
tablished and operated in compliance with
all pertinent state laws regarding its lo-
cation, ownership, operation and permissible

at the end of subsection (i) (2) (A), strike "or
rented by that bank" and insert, in lieu thereof,
the following:

", rented, or controlled exclusively by that

in subsection (i) (2) (B), strike " not estab-
lished..." and insert, in lieu thereof, "
presumed to not be established..."

The first of these amendments would ensure that state laws

which currently apply to ATM systems by virtue of being exceptions

to state branching laws, would continue to apply even though the

shared ATM would no longer continue to be classified as a branch.

This would preserve the heart of the status quo and would eliminate

the "wide open" ATM environment which would be occasioned by the


This is not our preferred way of accomplishing this end.

It would be simpler to merely amend the McFadden Act to make clear

that state laws specific to ATM location and function are to be

treated as exceptions to the McFadden Act applicable to national

banks as well as state banks.

The second of these amendments is designed to prevent mere

franchising of ATM networks by large BHCs in order to qualify for

the exception to the McFadden Act.

It would be all too simple for

a large money center BHC to market its ATM machines nationwide, with the guarantee of favorable financing and a guaranteed monthly

transaction fee which would cover a purchaser's monthly payments. Full service ATMs could be in operation in the corner of every marginal business in a good location in the country, nominally

owned by the host business.

The third of these is designed to eliminate an apparent loop

hole in s. 2898.

Specifically, it would make it clear that a BHC

cannot avoid the application of the McFadden Act through a sham

billing arrangement whereby it is assessed "transactional fees"

for use of a machine which it has established.

It is important to

preserve, in this exercise, the ability of a court to look behind mere contractual arrangements to actual control of the devices in



CSBS does not believe that there is a current, demonstrated

need for S. 2898.

The Marine Midland case was brought in a state

which treated ATMs as branches for all institutions, allowing their

statewide placement, subject only to a "home office protection"


CSBS believes that courts should and probably will apply more

liberal state ATM provisions to both state and national banks,

since they are exceptions to state branching laws.


equality, which was the thrust behind the McFadden Act, can best

be maintained by allowing national banks to take advantage of

evolving state laws.

CSBS would support a legislative clarifica

tion of this point, if Congress deems it necessary.

However, we

believe that current law anticipates developments in state branch

ing laws, including adoption of a state ATM-specific law, and makes

them applicable to state ATMs through operation of the McFadden


State laws which allow participation in interstate as well as

intrastate shared ATM networks should be equally applicable to na

tional banks.

It is axiomatic that "bad cases make bad law."

An isolated

case, decided under a peculiar New York state law, should not be

used to blackmail Congress into "gutting" the safeguards provided

by the McFadden Act and Douglas Amendment.

If full nationwide

deposit-taking is to occur, it should not be by way of a band-aid

offered for your approval by the "McFadden Busters".




S ce/






Statute is General;
but detailed imple-
menting regulations

State regulations cover both federal Silent

banks, S&L's and credit
unions. Fees for out-of-state pro
viders. Federal regulators allowed
to permit federally chartered
financial institutions domiciled
in Alabama to follow these regu-

Sharing permitted,
may be required of
any institution
by Superintendent
of Banks

No new deposit
account may be
opened, but other-
wise permits any
deposit, withdrawal
transfer and any
other service not



Statute: Acts 1977,
No. 643

Both National and State Banks are
covered by the statute

Non-discriminatory sharing is required with home county banks

Engage in any
banking trans-

same county
Same hame
office protec-

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