Intervention by the Office of the Comptroller of the Currency has added complexity to the legal dispute in Connecticut over automated teller machine surcharges.
The OCC has filed a brief on behalf of Fleet Financial Group and First Union Corp., which are seeking to overturn state rulings that bar ATM surcharges. In a series of court decisions, the two banks won and then lost the ability to surcharge.
Acting Comptroller Julie L. Williams, under whom the OCC brief was filed Dec. 1, was principally concerned with her office's jurisdiction over the matter, not the banks' surcharge rights.
"The state action at issue in this lawsuit ... significantly interferes with the OCC's authority under federal law," says the brief, which was filed in U.S. District Court in New Haven.
Ms. Williams is now the agency's chief counsel; John D. Hawke Jr. was named comptroller last week.
After the OCC's move, state Banking Commissioner John P. Burke canceled a hearing that had been set for Dec. 3. At that hearing he was to have heard arguments from Fleet and First Union on why he should lift a cease- and-desist order he had imposed. Mr. Burke has staunchly opposed surcharging and bases his legal case on an interpretation he made in 1995 of a 1976 state law.
A hearing on the cease-and-desist order is now scheduled for Dec. 22 in U.S. district court before Judge Janet Bond Arterton.
Fleet, which is based in Boston, welcomed the OCC brief, said James Schepker, a spokesman. "We are governed by a federal charter," he noted. By intervening, Mr. Schepker said, the OCC was saying the state "doesn't have jurisdiction over this fair-market pricing issue."
Fleet has said that it loses $15,000 a day by forgoing the fees. That comes to $1.4 million per quarter-an amount equal to 0.3% of Fleet's third- quarter net income of $402 million.
Connecticut Attorney General Richard Blumenthal is not sympathetic. In a written statement he characterized the OCC as "federal bureaucrats" and said he would "vigorously fight" the agency and the banks.
Their efforts "force our state's consumers to pay these double charges that serve only to boost the banks' bottom line," Mr. Blumenthal wrote.
Without coming down one way or another on the legality of ATM charges, the OCC argued that it holds "exclusive" enforcement powers over national banks.
In its brief it claims "broad authority over the chartering, supervision, and regulation of almost every aspect of the affairs of banks organized under the National Bank Act."
The legal tug-of-war began in January 1997, when Fleet sued in U.S. District Court in New Haven. The company won a favorable ruling on Sept. 30 of this year. Then First Union-but not Fleet-began surcharging.
Mr. Burke, the banking commissioner, said the practice was illegal under state law. He appealed the federal court's decision Oct. 5 and obtained a temporary stay one week later.
First Union stopped surcharging, but the order expired Oct. 23. That cleared the way for Fleet, First Union, and BankBoston Corp. to levy the fees, which they began doing.
On Nov. 9 a New York Court of Appeals reversed the federal court's ruling, saying the authority over state law lies with state-not federal- courts.
Mr. Burke followed with the cease-and-desist order on Nov. 10, and all the banks stopped surcharging. Fleet and First Union tried to obtain an injunction in both state and federal courts.
The companies failed in State Superior Court. For the next round, in federal court, they will have a national regulatory agency in their corner.
"The fact that the OCC is the primary regulator of national banks obviously gives some weight to their arguments," said Lynne Barr, an electronic banking attorney for Goodwin, Procter & Hoar of Boston. "It is very helpful that the OCC has come into it."
The OCC brief says Congress has "sharply limited the authority of other federal agencies and the states to regulate" national banks.
This right, so-called "visitation," includes overseeing a bank's activities, the agency says. Therefore, the OCC argues, it is "specifically charged with the responsibility for enforcing through cease-and-desist orders a national bank's violation of any law, rule, or regulation."