Santa Monica and San Francisco violated federal law by trying to block banks from charging fees to people who use automated teller machines but don't hold accounts with those institutions, a federal judge ruled in a decision released Monday.
However, officials for both cities said the dispute is not over and that they soon will appeal to the U.S. 9th Circuit Court of Appeals.
"This ruling isn't a defeat. It's a step forward," Santa Monica City Councilman Kevin McKeown said Monday.
The decision by U.S. District Judge Vaughn Walker in San Francisco means the state's two largest banks, Wells Fargo and Bank of America, may continue to charge customers of other banks to use their automated teller machines in Santa Monica and San Francisco. Fees average about $1.50 per transaction, bank officials said. The law does not affect the separate charges that banks impose on their own customers for using the machines.
San Francisco and Santa Monica are the first in the U.S. to attempt to ban such bank surcharges within city limits. City officials say the fees are excessive.
But their ordinances were answered by the lawsuit filed in November by the two banks and the California Bankers Assn.
In his order dated June 30, Walker ruled that the ordinances not only violate federal banking laws, but would cause the banks "irreparable economic loss."
A spokesman for the banks, Harvey Radin, said Walker's order echoes related decisions issued elsewhere in the nation.
"The decision really upholds the right of businesses to price their products and services for a free market," Radin said from San Francisco Monday.
Officials for the two cities said they weren't surprised by the ruling because the same judge in November issued a preliminary injunction that prohibited enforcement of the two laws.
San Francisco City Atty. Louise Renne, in a statement released Monday, opposed the judge's ruling. She said that "the intent of federal law is to allow consumers to protect themselves from exorbitant ATM fees."
Santa Monica Deputy City Atty. Adam Radinsky said Vaughn's order incorrectly implies that states and cities lack the authority to regulate the fees of national banks.
"Congress as well as the courts have always recognized that local governments have the power to restrict and ban certain bank fees that are anti-consumer and excessive," Radinsky said.
The court battle originated in Santa Monica when the City Council in October adopted a law forbidding the banks to charge non-account-holders to use their automated teller machines. Voters in San Francisco in November passed a nearly identical initiative.
Although most other large financial institutions, including Washington Mutual, Union Bank of California and California Federal Bank, complied with the Santa Monica law until the November injunction.