« PreviousContinue »
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
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, 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
The following changes were suggested:
at the end of section (i) (1), strike the period
"if such automated device is otherwise es-
at the end of subsection (i) (2) (A), strike "or
", rented, or controlled exclusively by that
in subsection (i) (2) (B), strike "...is not estab-
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.
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
It is axiomatic that "bad cases make bad law."
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".
Statute is General;
State regulations cover both federal Silent
banks, S&L's and credit
No new deposit
Statute: Acts 1977,
Both National and State Banks are
Non-discriminatory sharing is required with home county banks
Engage in any