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Death, Taxes...and ATM Regulation?

By Ann All, Senior Editor, ATMmarketplace.com

Originally published on ATMMarketplace.com, Jan. 22, 2004; reprinted with permission. (c) 2004 NetWorld Alliance LLC. All rights reserved.

As if "death" and "taxes" aren't enough when it comes to life's inevitabilities, those in the retail ATM business will likely soon be coping with "increased regulation."

That's the view of many industry watchers, some of whom are working with state officials in California and New York to help craft legislation targeting independent ATM deployers in those states.

Kurt Helwig, Executive Director of the Electronic Funds Transfer Association (EFTA), said he and members of the EFTA's Board of Directors expected the issue of regulating non-bank ATMs to heat up following the late November 2003 airing of a "Dateline NBC" report.

The broadcast showed a convicted felon purchasing an ATM from an ISO and installing it in a New York retail outlet-after being assured that no background check was necessary.

"A lot of us knew this was coming," Helwig said, noting that Board Members participating in a conference call following the broadcast even successfully predicted which two states would be the first to propose legislation.

Getting to Know You

The good news, said Helwig, is that officials in both California and New York seem interested in industry feedback.

"We've had positive conversations with both groups," he said. "They seemed pleasantly surprised that we didn't have a knee-jerk negative reaction to the idea of legislation."

A New York State Police officer who is a member of a task force that will likely influence any legislation introduced there plans to attend the February 2004 ATM Industry Association (ATMIA) East conference in Tampa, Fla., said Lana Harmelink, ATMIA's Director of Operations.

In addition to the state police, other groups represented on the task force include the New York State Banking Department and New York Division of Criminal Justice.

Harmelink said the officer seemed particularly interested in a list of Security Best Practices created by the Global ATM Security Alliance, a group organized by ATMIA that includes law enforcement agencies, EFT networks and ATM manufacturers, among others.

"We know this legislation is coming and we want to be able to help guide it with input from all sectors of the industry," she said. "We worked hard for two years on putting these best practices together; I think they'll help ensure that the industry will be a part of all this."

Helwig said the proposed legislation in California-Assembly Bill 1810, introduced last month-borrows a number of ideas directly from a list of recommended best practices produced last spring by the EFTA's ATM Integrity Task Force.

Sponsored by Assembly members Dario Frommer (D-Glendale), Patricia Wiggins (D-Santa Rosa) and Sarah Reyes (D-Fresno), the bill would require background checks and licenses for independent ATM operators. California's Department of Financial Institutions would oversee the effort.

"By requiring these vendors to obtain licenses, the small businesses who agree to house the ATMs will be protected because they will know whether the vendor and its ATM are legitimate," according to a statement issued by Frommer's office.

"Consumers often do not know who owns and operates a non-bank ATM and usually assume it is owned by a bank because of a lack of ownership identification requirements. The license will help to alleviate this problem by requiring vendors to advertise their legitimacy, clarify confusion as to who owns the machine and assist consumers who may experience an ATM malfunction in contacting the vendor."

In New York, State Senate Banking Committee Chairman Hugh Farley (R-Schenectady) has been considering legislation aimed at non-bank ATMs since last summer, said Peter Edman, Farley's Director of Staff. Farley is concerned with the lack of oversight of these machines.

"You don't necessarily know who these operators are, where they are or whether they are complying with the appropriate requirements, such as those for signage," Edman said.

The New York State Banking Department visits ATMs owned by financial institutions once a year to ensure that they are complying with requirements for adequate lighting and other security measures, Edman said.

Farley is seeking opinions from members of the ATM industry to help ensure legislation won't be "counterproductive," Edman said. "Imposing excessive costs on these operators would not only reduce the number of ATMs, but it would give banks total control of the industry."

There's also a risk of creating "an unnecessary burden" for the state agency that would ultimately enforce any regulations, Edman said.

Taking It to the Top

The best answer, Helwig said, might be federal legislation. Sen. Charles Schumer (D-New York), a member of the Senate Banking Committee, is reportedly interested in introducing legislation that would require background checks and licensing for ATM operators.

"I think (federal legislation) makes far more sense than going down the state route," he said. "It's certainly easier dealing with one set of standards versus 50-plus."

Harmelink agreed, noting that many independent providers manage ATMs in multiple states. "That's why we're striving for consistency with New York and California. They've been more proactive with legislation. If it passes there, other states are likely to introduce legislation of their own," she said.

Helwig said the ATM industry must make an effort to get involved in early legislative efforts-whether they are on a federal, state or even local level.

"Conceptually, I don't have a problem with the idea of regulation, but it's important for us to be at the table when it's drafted," he said. "It's incumbent on us as an industry to help make regulators aware of how this industry works and how it can be best regulated."

Original article: www.atmmarketplace.com/news_story.htm?i=18055

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