Trade Group For ATM Servicers Files Suit Against Diebold

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A group of ATM servicers and maintenance providers has filed suit against Diebold Inc., claiming the ATM manufacturer violated federal antitrust laws by trying to edge them out of the multi-million dollar business of servicing Diebold machines.

The suit comes at a critical time as credit unions and banks are feverishly working to upgrade all of their existing ATMs to the new Triple DES (Triple Data Encryption Standard) security parameters required by MasterCard and Visa for all machines switched through the nation's two biggest electronic funds networks. Both MasterCard and Visa have set an April 1 deadline for Triple DES compliance, and have ordered all ATM switch providers to turn off machines not compliant with the new standards on April 1, in order to ensure protection of sensitive cardholder information during the transaction process.

Credit unions are currently working with ATM servicers to either upgrade their hardware or software, while others will be required to replace outdated machines altogether.

The suit was filed in U.S. District Court here by the Financial & Security Products Association, an Albuquerque, N.M-based trade group representing 300 companies that work to service ATMs. The group claims that Diebold has abandoned its "hold harmless" policy that held Diebold harmless for any liability by freely allowing third-party vendors to work on Diebold machines and gave them access to spare parts and software.

The suit claims the Diebold is now requiring that its existing customers wanting to upgrade their ATMs buy new keyboards and encryption software exclusively from Diebold, and that only a Diebold technician can perform the installation. The action also claims that Diebold is refusing to disclose the password needed to perform diagnostic tests.

"We want to restore competition in a very important market, which of course, is the ATM market," said John Vrabec, executive director of the ATM servicers trade group. "On the topic of Triple DES upgrades, ISO and VISA have security procedures that require manufacturers to track the sale of certain encryption devices to the end user. Encryption devices that are compatible with Diebold's ATMs are available from any number of manufacturers."

Diebold officials refused to comment on the suit publicly last week, but in a prepared statement the company denied the allegations in the suit. Diebold said its longstanding policy has been to make parts and software available to licensees for all its machines, including the new Opteva line.

But, the company said, "Diebold's service organization has invested significant financial and intellectual resources in developing advanced diagnostic tools for its Opteva line. These tools are only available to Diebold service personnel."

The ATM servicers are not asking the court for monetary damages but only to regain access to parts and software in order to be able to service Diebold ATMs.

"If this is not addresses now and there is not some resolution of fairness it could eliminate our industry," said Vrabec.

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