A statement that the Electronic Fund Transfer Act (EFTA) and Regulation E protect consumers when funds are wired from their account without authorization was submitted by the federal consumer financial protection agency in an ongoing court case that targets Citibank, N.A.
In a blog post, the Consumer Financial Protection Bureau (CFPB) said that in the suit, filed in the U.S. District Court for the Southern District of New York, the state of New York accuses Citibank of “failing to respond adequately when people promptly told the bank that scammers had stolen money by initiating wire transfers from the consumers’ accounts online.”
The CFPB says that as long as a person promptly notifies their bank that access to their account has been stolen, the law limits the person’s losses to $50.
It said the state alleged in this instance that rather than following EFTA’s protections for such circumstances, Citibank looked to a law that was intended to govern transactions between commercial entities “which does not provide the same level of consumer protection to victims of scams.” It said Citibank has argued that the EFTA “doesn’t apply because the scammers ultimately used a wire transfer to take the money, and the Act contains an exemption for transfers made by banks ‘by means of’ a wire service.”
The CFPB said that in its brief submitted last Tuesday, it argued that EFTA’s wire transfer exclusion applies only to bank-to-bank wire transfers from EFTA’s consumer protections.
“When banks connect wire transfer capabilities to consumer-facing online banking platforms, an online-initiated wire transaction meets the definition of an ‘electronic fund transfer’ and only the bank-to-bank wire portion of that transaction is excluded from EFTA and Regulation E coverage,” it said. “The remaining electronic fund transfer is subject to EFTA and its implementing Regulation E.”
CFPB blog post: Banks’ responsibility for scams