States lose case to regulate ATMs

High court refuses to hear an appeal on 1976 Iowa law

Banking

April 25, 2000|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON -- Maryland and 20 other states failed to persuade the Supreme Court to step in yesterday to protect their authority to regulate the placement and operation of banks' automated teller machines.

Without explanation, the court turned down an appeal in an Iowa case that argued that states needed to monitor ATMs closely to protect bank consumers from mistakes and fraud.

Parts of Iowa's 1976 electronic transfers law were struck down in September by a federal appeals court, which found that federal banking law had taken away from states their authority to regulate ATMs operated by nationally chartered banks. The appeals court, the 8th U.S. Circuit Court of Appeals based in St. Louis, left the states free to oversee the operation of ATMs at state-chartered banks.

Iowa banking officials took the dispute on to the Supreme Court. Twenty other states, including Maryland, supported the appeal, saying the issue was "of enormous importance."

Iowa's law required banks operating ATMs at sites away from bank offices to have an office in the state, barred advertising for the bank at such remote sites and required any bank that operated an ATM in Iowa to have state approval.

Those requirements were challenged by an out-of-state national bank, Bank One-Utah, based in Salt Lake City. It argued that a law Congress passed in 1996, which said that ATMs operated by national banks were not branch banks, took ATMs out from under state control. That is the view the appeals court upheld.

The Supreme Court's refusal to hear the case did not mean that it agreed with the result as a legal matter.

One reason it might have bypassed the case at this point is that other aspects of Iowa's ATM regulations remain under challenge in federal court, so further developments could occur.

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