Banking Interpretations

NYSBL Sections 75-a. 105-a, 367 and GRBB Part 73

January 10, 2006

[ ]

Re: ATM/Check Cashing Terminal Licensing

Dear [ ]:

This is in response to your recent letter to the New York State Banking Department. From your letter, it appears that you are inquiring whether there are any legal decisions on licensing requirements for automated check cashing terminals owned by non-banks. You also enclosed some literature from the manufacturer/distributor of certain terminals relating to the devices' capabilities, including functionality as an ATM and otherwise.

From your inquiry, it is difficult to know exactly what you are questioning, but we will try to provide some information we think is responsive. You should be aware of several things, including licensing requirements for cashers of checks, which is discussed below.

ATMs -- There are no licensing requirements in New York State for the ownership and operation of ATMs by the non-banks you inquired about. Therefore, as far as we know, there are no relevant legal decisions relating to licensing requirements in New York State for the ownership and operation of ATMs by non-banks. You may wish to note, however, that there are certain notification and other requirements under New York Banking Department regulations for banking organizations that establish ATMs. (See 3 NYCRR Part 73) These regulations do not appear to be relevant to non-banks, which you inquired about.

The ATM Safety Act, Article 2-AA of the New York Banking Law, provides the security measures that banking institutions must maintain over ATMs they control. Under the Act, "automated teller machine" means a device which is linked to the accounts and records of a banking institution and which enables consumers to carry out banking transactions. Specifically excluded from the Act, however, are ATMs located in a structure or space not primarily related to banking, such as a supermarket or airport, provided the ATM located there is only available during the regular hours the facility operates.

Check Cashing -- Article 9-A of the New York Banking Law covers licensed cashers of checks and it provides, in Section 367, that "No person, partnership, association or corporation shall engage in the business of cashing checks, drafts or money orders for a consideration without first obtaining a license from the superintendent." Furthermore, as provided in Section 374.2,

The provisions of this article shall apply to the operation of electronic check cashing machines. No person, partnership, association, corporation or other organization required to be licensed under this article shall operate an electronic check cashing machine without being duly licensed by the superintendent to engage in such business pursuant to this article.

Although there are legal decisions relating to cashers of checks generally, to my knowledge there are no New York decisions specifically related to check cashing terminals.

EFTs -- You may also want to note that Regulation E is the federal regulation that governs electronic funds transfers (EFTS) involving consumers. Disclosures are required to be given, under Regulation E, by financial institutions (includes banks and non-banks) with which a consumer contracts for EFT services. The initial disclosures, including any fees to be imposed by the financial institution and a notice that a fee may be imposed by an ATM operator, must be given before the first EFT transaction. See 12 CFR 205.7.

Also, disclosures are required on ATMs if a fee will be imposed and the amount of the fee. See 12 CFR 205.16. This disclosure requirement applies to any person that operates an ATM (that is, banks and non-banks) where the consumer is not accessing his or her account held at the ATM operator.

Similarly, Section 399-y of the New York General Business Law requires, if ATM fees are charged by an ATM operator that does not hold the consumer's account, that a notice must be posted 1) on a sign near the ATM of the fee and amount and 2) on the ATM screen or on the paper receipt of the fee and amount and of the customer's right to cancel the transaction without a fee.

If you have any other questions, you may call me at (212) 709-1660. .

Very truly yours,

Alan M. Weinberg
Assistant Counsel