Relates to the operation of automated teller machines by entities other than banking institutions

Summary of provisions

This bill adds a new Article 14-A to the Banking Law to provide for the registration and oversight of non-bank operators of automated teller machines. The bill provides that, after June 1, 2013, no person (other than a banking institution) shall operate an automated teller machine without first being registered by the Superintendent of Banks. ATM networks would also be required to register with the superintendent.

Similar to other articles within the Banking Law, the bill establishes provisions governing applications for approval, changes of control, the examination of books, accounts and records, and the suspension or revocation of an entity's authorization to operate.

A registered operator which violates the law or regulations, or which causes actual damage through any unfair, unconscionable or deceptive practice, is subject to the general supervisory powers of the Superintendent and to the civil penalties applicable to any regulated entity which violates the law. Operating a cash-dispensing machine without being registered is a Class A misdemeanor.

The bill establishes a Class C felony penalty for situations where an unregistered person sets up a machine that is not hooked up to an ATM network. This penalty targets those instances where a machine is set up solely for the purpose of fraudulently capturing the account and PIN numbers of consumers. These unregistered operators shall also be civilly liable to persons who suffer damages as a result of the theft of personal identification and account information.

The bill also requires registered operators to post the following information on or near a machine: the operator's name; a disclaimer that the operator is not a banking institution; the name, address and 24 hour toll-free phone number for inquiries/complaints; and a statement that the operator is registered by the Department of Financial Services (and the Department's address/phone number to make inquiries/complaints). Registered operators would also be required to print certain information on a transaction receipt: the transaction amount; the amount of the fee imposed by the operator; the total amount debited to customer's account; the date/time of transaction; a number/code identifying the customer; and the location (or a number/code which identifies the location) of the ATM machine.

The Superintendent of the Department of Financial Services is authorized to promulgate regulations to implement this article,

including such regulations as may be necessary to qualify the terms and conditions of agreements with or contracts between registered operators and service agents or processors in order to ensure the protection of customers, and such regulations as may be necessary to define improper or fraudulent practices and operational and performance standards applicable to the activities of registered operators and registered networks for the purpose of preventing money laundering and identity theft.

Finally, the bill amends certain general sections of law to ensure that they apply to registered operators of nonbank ATMs. These sections involve the fingerprinting of applicants (Section 22), the applicability of certain general supervisory powers of the Department of Financial Services (Section 29) and the imposition of civil penalties for violations of the Banking Law (Section 44).

Existing law

Independently owned ATMs are currently not regulated under New York law.

Justification

Over the past decade, a major development in the ATM market has been the growing presence and role of independently owned and operated ATMs. As a result, ATMs have been placed in many more locations, resulting in greater availability, convenience and options for the public.

At the same time, there have been some questions and concerns about the Possibility that abuses may occur in regard to these non-bank machines. While the most common type of ATM fraud involves persons who tamper with A legitimate bank or non-bank machine, there have also been some cases In which persons set up ATMs and used them to record and obtain personal Account information from consumers. They then made up fake cards with this information and illegally withdrew money from the bank accounts of these consumers.

There have also been concerns that some non-bank ATMs may not be complying With the State's ATM fee disclosure requirements, and that these ATMs may not clearly identify the machine's owner/operator, making it difficult for the consumer to know who they should contact if there is a problem.

This bill would help address these concerns by requiring non-bank ATM operators to register with the State. It also codifies certain industry "best practices" in regard to requirements for sponsorship agreements, Placement agreements and background checks. Finally, the bill also establishes civil and criminal penalties for certain violations involving non-bank ATMs.

Legislative history

S.4675 of 2005-06 S.5343 of 2007-08: Referred to Banks S.4979 of 2009-10: Referred to Banks S.3780-A of 2011-12: Amended and Recommitted to Banks

Fiscal implications

There is no impact to the General Fund. Any increased regulatory costs incurred by the Department of Financial Services are paid for by the regulated industry.

Effective date

This act shall take effect on the one hundred eightieth day after it shall have become a law.