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Banking Commissioner Orders Banks
to Halt Charging ATM Fee

November 10, 1998  -

Connecticut Banking Commissioner John P. Burke today ordered three banks to halt charging a transaction fee, a so called surcharge, to non-customers who access their bank accounts from an automated teller machine, or risk a possible fine for not doing so. The order to cease and desist became effective immediately, specifically targeting three of the largest banks located in Connecticut which currently impose the surcharge on non-customers.

Burke took the strong administrative action against Fleet National Bank, First Union National Bank and BankBoston, N.A. following a ruling yesterday by the Second Circuit Court of Appeals in New York. That ruling not only nullified an earlier ruling by the US District Court in New Haven that would have allowed surcharging, but stated that the issue of whether the imposition of a surcharge in Connecticut is legal should be decided in the state's court system and not in federal court.

Fleet initially challenged the state's ban on ATM surcharges nearly two years ago in federal court claiming the transaction fee is permissible and argued it is a necessary fee in order to recoup a portion of the expenses incurred by the bank to establish and maintain its ATMs. Burke, on the other hand, maintained that it was acceptable for a customer's own bank to charge him or her for using another bank's ATM but that any additional second charge, or surcharge, by the other bank would be illegal based on his interpretation of existing state law. When the US District Court ruled last month that Fleet and other banks have the right to impose a surcharge, Burke, through the efforts of State Attorney General Richard Blumenthal, appealed that decision.

"I am pleased that the appellate court agreed with my position," Burke said. "I have continually been opposed to fighting the case in federal court believing that the surcharge issue is one that impacts Connecticut banking law and should therefore be resolved in state court. The decision of the Second Circuit cleared the way for me to order the banks to immediately stop imposing the fee," Burke added, emphasizing that his role is to enforce the law as it is written and that his original interpretation banning surcharges now stands.

Burke noted that while the issue of surcharging is a complex one, the court has now identified the proper legal forum to address the issue should banks choose to pursue litigation. And, he is pleased that the banking department can continue to prevent such charges from being passed on to Connecticut consumers pending the results of any further litigation.

While Burke's order to stop assessing surcharges is directly aimed at Fleet, First Union and BankBoston, the law applies to any financial institution that maintains ATMs in Connecticut.