the McFadden Act and the Douglas Amendment to the Bank Holding Com pany Act. The Status Quo The current status of ATM placement, function and regulation is determined by federal statute, Appellate and Supreme Court decisions and state law. The relevant federal statutes are 12 U.S.C. §§36 and 81. Section 81 requires each national bank to conduct its "general business" at its main office, as stipulated in its organizational certificate, and at its "branch or branches, if any, established or maintained by it in accordance with the provisions of (12 U.S.c. 836)." Section 36 (c) provides that a national bank may not "establish and operate new branches" except within the state in which the bank is located, and then only to the extent that state-chartered banks in that state are permitted to establish and operate branches. The term "branches" is defined in Section 36 (f) as including "any pranch bank, branch office, branch agency, additional office, or any branch place of business. .at which deposits are received, or checks paid, or money lent." The Supreme Court and three U.S. Courts of Appeal have pointed out that the scope of the term "branch" is not limited to offices which perform the three functions designated in Section 36 (f) but also is intended by Congress to include any place at which a bank transacts "any business carried on at the main office. In one of these cases, Colorado ex rel. State Banking Board v. First National Bank of Fort Collins, the Tenth Circuit Court of Appeals held that a national bank's off-premises customer-bank communications terminal (CBCT) was a "branch" not only because it permitted the bank to re ceive deposits, one of the activities expressly described in Section 36(f), but also because it permitted the bank's customers to perform other "traditional banking transactions," namely, the withdrawal of funds and the transfer of funds from one account to another. And, in IBAA v. Smith, the U.S. Court of Appeals for the District of Columbia Circuit held that credit card and loan payments made by means of CBCT's were banking transactions within the scope of Section 36 (f) even if they could not be considered to be "deposits". Relying upon the Supreme Court's analysis in Plant City, the Court held that considerations of "competitive equality" between state and federal banks, rather than private contractual relationships between a bank and its customers, determine whether a facility is a "branch". Because banks with CBCT's could provide banking services to their customers away from their offices and thereby obtain a competitive advantage over banks which did not have CBCT's, the Court held that CBCT's were "branches" under Section 36(f). In essence, by application of the McFadden Act, customer bank communication terminals owned by national banks which accept deposits and disburse funds are branches and are controlled by state law. It is by virtue of the application of the McFadden Act that state law is controlling in the ATM area and any amendment to the McFadden Act disturbs the status quo. The current system is based on state law and the OCC-developed position that a CBCT used by a national bank's customers is not a branch unless the bank has a possessory or ownership interest in the CBCT and has thereby established the CBCT within the meaning of Section 36(£). States have enacted laws on the ownership, location, operation and permissible functions of ATMS which have made possible 39-248 0-84--3 the interchange networks. Congress, following the release of the Final Report of the National Commission on Electronic Fund Transfers, chose to address various consumer protection aspects (e.g., liability for unauthorized transfers), but did not choose to overturn state authority or expand the legal rights of the OCC. Thus, the system has been able to provide an incredible level of services to all types of bank customers. National banks have benefited from the competitive equality inherent in the current system. They participate in extensive shared systems established pursuant to state law. As recently described by the Electronic Funds Transfer Association: Today there are as many as 200 shared re- begin offering ATM services for the first All of these systems have enjoyed the blessing of state laws, most of which distinguish between ATMs and other bank facilities. In a recent CSBS survey of state laws, (draft results attached) numerous state statutes were found to control important aspects of ATM placement, sharing, use and permissible functions within states' respective borders. That survey found: * 23 state statutes cover ATM deployment by national 37 states require or expressly permit ATM sharing, some cases. 8 states of the 42 with statutes explicitly dealing Nearly all states with state statutes have a Both this and earlier CSBS surveys of state law and regulation found a high availability of statewide EFT services whether by placement of facilities or by agreements to offer services through shared, existing facilities. In this survey, 31 states provide for statewide offering of EFT services. In an earlier CSBS survey, which included regulatory interpretations of statutes by state supervisors, 36 states specifically allowed access to ATMs by customers of out-of-state banks, under varying circumstances. these survey results are preliminary, subject to review and possible revision by state regulatory authorities, they give a fairly accurate reading of the status quo under which both state and national banks operate. While *Survey results are preliminary, subject to review and possible revision by state regulatory authorities. In April of this year, the United States District Court for the Western District of New York held that bank utilization of an ATM owned by a third party to allow customers to make deposits and withdrawals from bank accounts held with that bank constitutes a "branch" within the meaning of the McFadden Act (Independent Bankers Association of New York State v. Marine Midland Bank). The Court refused to "blindly accept" the position of the Comptroller that an ATM is not a branch if it is not owned or rented by a national bank. It is clear from that decision, that the Court looked at the substance of the bank/third party relationship rather than its form and found that when customers deposited money in their bank accounts through the ATM in question, the bank had received a deposit within the meaning contemplated by the McFadden Act. The Court was faced with a state law which specifically defined ATMs as branches and it correctly applied state branching laws. This decision, in our opinion, should not dictate the outcome of any similar suit in states which treat ATMs differently than bank branches. Exceptions in state laws for unmanned facilities are exceptions to the branching laws and, therefore, equally applicable to state and national banks. The problem, however, would remain as to interstate shared ATMs, since interstate branches are forbidden to national banks under the McFadden Act. S. 2851, the Financial Services Competitive Equity Act, passed by the Senate last week, solves this problem. Section 1002, in part, amends the National Bank Act (12 U.S.C. 5155) by adding an additional condition under which a national banking association may retain or establish and operate a branch. It allows a national bank to have a branch in another state from that |