In Bank of America v. City and County of San Francisco, Nos. 00‑16355, 00‑16394, 2002 WL 31399026 (9th Cir. Oct. 25, 2002), the U.S. Court of Appeals for the Ninth Circuit held that national banks and federal savings associations need not comply with ordinances limiting ATM fees enacted by San Francisco and Santa Monica due to federal preemption.

    The case involved the cities of San Francisco and Santa Monica, each of which in 1999 enacted identical ordinances barring financial institutions (defined to include banks, savings associations, savings banks, credit unions and industrial loan companies) from charging non-depositors a fee for using their ATMs. Bank of America and Wells Fargo Bank, both national banks, and the California Bankers Association filed suit, challenging the validity of the ordinances. California Federal Bank, a federal savings bank, was subsequently added as a plaintiff.

    The Ninth Circuit held that the ordinances are preempted by (i) the Home Owners’ Loan Act and Office of Thrift Supervision regulations (with respect to federal savings associations) and (ii) the National Bank Act and Office of the Comptroller of the Currency regulations (with respect to national banks). The regulation of federal savings associations by the OTS is so pervasive, said the Ninth Circuit, as to leave no room for state regulatory control. Therefore, state limitations on the authority of federal savings associations to collect ATM fees are invalid under the Supremacy Clause of the U.S. Constitution. The court also held the ordinances invalid with respect to national banks, specifically rejecting the cities’ contention that charging ATM fees to non-depositors exceeds the incidental powers granted to national banks under Section 24 (Seventh) of the NBA. Finally, in response to the cities’ argument that the Electronic Funds Transfer Act authorizes states to regulate ATM fees as a consumer protection measure, the court opined that the EFTA does not save the ordinances from preemption for two reasons. First, regulation of ATM fees is not the type of consumer protection measure contemplated by the EFTA and, second, the EFTA anti‑preemption provision (which saves state laws affording greater protection to consumers than the EFTA from preemption by the EFTA) does not preclude preemption by other statutes, such as the HOLA and the NBA. Accordingly, the Ninth Circuit affirmed the district court’s grant of summary judgment to the banks as well as the permanent injunction prohibiting the cities from enforcing the ordinances.

    For more information regarding this Alert , please contact Judy Scheiderer at (614) 628‑1607 or [email protected] .