Federal Court Ruling Calls ATMs Bank Branches; Big Impact on Industry Possible; Marine Midland May File Appeal

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NEW YORK -- A ruling earlier this week by a federal judge could have a broad impact on the legal status of automated teller machines.

Judge Michael A. Telesca of the U.S. District Court in Rochester, N.Y., said that Marine Midland Bank's use of an ATM qualified that terminal as a branch of the bank.

The ruling appears to contradict the existing policy of the Office of the Comptroller of the Currency. The Comptroller's office has maintained that an ATM is not a branch as long as the bank using it does not own or rent the terminal.

This policy has facilitated the spread of interstate ATM networks, which has contributed to the trend toward interstate banking. Since the McFadden Act prohibits interstate branching, banks can allow their customers to use the terminals in other states only if the machines are not considered out-of-state branches.

So banks have installed their own teller machines and granted access to out-of-state institutions, which typically pay the machine-owning institution transaction fees. Insterstate ATM networks are especially convenient in metropolitan areas that overlap state borders, and several national networks are now operational.

Branch definitions are also important for intrastate banking. The McFadden Act says that national banks must abide by the branching laws of the state in which they are based.

"We don't have an immediate comment and we want to digest [the judge's decision]," said Eugene M. Katz, assistant director of the Comptroller's litigation division. Mr. Katz, who has not read the decision, said that other attorneys told him the decision was limited to the particulars of this case. Marine Considering Appeal

"I think there are broader and narrower possible readings of the opinion," said Walter Matt, assistant general counsel at Marine Midland. The Buffalo-based bank is considering filing an appeal, he said.

The legal status of ATMs and whether or not they are branches has been the subject of several legal disputes over the years. …