Regulators Watch ATM Service Co.
May. 22, 1999
WASHINGTON (AP) _ Banking regulators have ordered a big ATM company serving banks in 13 western states to provide assurances by June 30 that it is ready to address the Y2K computer glitch, or face possible contract cancellations by 750 banks.
The directive given to TransAlliance LP by the Federal Reserve and four other agencies reflects the increased attention being paid to banking industry support companies to make certain they are prepared for the year-end computer problem.
A failure by these service companies to become Year-2000 compliant could be just as devastating as a failure by the banks themselves, officials said. Scenarios of a Y2K failure range from consumers being temporarily unable to use ATM machines to having their entire financial information wiped out when computer systems crash.
Government regulators have lauded the nation's banking industry for its work preparing for the technology problem, when some computers originally programmed to recognize only the last two digits of a year could interpret 2000 as 1900.
Under the agreement with regulators, TransAlliance will make needed changes in its computer systems so that all its bank customers will be able to successfully complete their Year 2000 testing by June 30 _ the deadline set for banks by the federal government.
TransAlliance, based in Bellevue, Wash., agreed to have its own systems ready by that date. ``We are pleased that we could agree with the regulators on the steps we are taking to ensure Y2K readiness,'' James D. Benson, TransAlliance's president and chief executive officer, said in a statement.
The company provides automated teller machine services, including electronic transaction services, to some 750 banks, thrifts and credit unions in Alaska, Arizona, California, Colorado, Hawaii, Montana, Idaho, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming as well as British Columbia in Canada.
A random sample of interviews of people who use ATMs in Seattle, Wash., suggested that while most are not worried about the Y2K problem, they also plan to put a little money aside _ and keep closer recores _ in case something goes wrong with the machines.
``I think it'll be fine,'' said Jocelyn Francis, 30 of Seattle, who said she does all her banking through ATMs. Still, she said she's worried about possible minor distruptions and plans to take some money out early.
Rob Hopps of Maple Valley, Wash., said he's being more careful on keeping paper records of all his transactions to keep better track of his bank balance as the end of the year approaches _ just in case.
Electronic Data Systems, the technology company founded by billionaire Ross Perot, owns 50 percent of TransAlliance. The other half is owned by a group of 24 banks in the West which operates the Exchange ATM network. Its customers include Washington Mutual Bank, KeyCorp, the credit union for employees of Boeing Co. and First Mutual Bank of Bellevue.
Although TransAlliance provides electronic services to some 50,000 outlets where machines take cards for payment at gas stations, convenience stores and other locations, that system is not covered by the agreement.
In the event the conditions weren't met, the banks that TransAlliance serves would be allowed without penalty to annul their contracts with the company.
The regulators also would have the authority to impose fines on the company, but that isn't mentioned in the agreement.
John Hall, a spokesman for the American Bankers Association, said the regulators ``are doing their job and making sure that consumers' money is safe. ... It brings pressure on companies that provide services to financial institutions.''
Bankers have promised consumers that ATM machines, credit cards, checks and banking services will function normally through the millennial date change. However, banks, thrifts and credit unions, all of which are closely regulated, are linked with numerous companies that provide services to banks and operate with less government supervision.
``A lot of these (service) firms may not be ready for the Year 2000,'' said Edmund Mierzwinski of U.S. Public Interest Research Group, a consumer advocacy organization. ``I'm happy that the Federal Reserve is putting its foot down early.''