By: Robert J. Nahoum
What is the Electronic Funds Transfer Act (EFTA)?
The Electronic Funds Transfer Act is a federal law, codified at 15 U.S.C. § 1693 et seq., that protects individual consumers who use electronic methods to move money, such as ATM withdrawals, debit card purchases, point‑of‑sale transactions, ACH transfers, and certain wire or remittance transfers. Its purpose is to create a basic framework of rights, responsibilities and liabilities for consumers and financial institutions when money is moved electronically.
What types of transactions are covered?
EFTA and its implementing regulation, Regulation E, generally apply to electronic fund transfers from a consumer bank account, including ATM withdrawals, debit card transactions, electronic bill payments, preauthorized debits, person‑to‑person transfers, and many online or mobile banking transfers including Zelle, PayPal and CashApp. Certain consumer wire and remittance transfers are also covered, but purely business accounts or paper‑only transactions are typically outside the statute.
What is an “unauthorized electronic fund transfer”?
An unauthorized electronic fund transfer is a transfer from your account that was initiated by someone other than you without your actual authority and from which you receive no benefit. Transfers made by someone you allowed to access your card or account information, until you notify the bank that the person is no longer authorized, may not be treated as “unauthorized” under the statute, except in some situations where you were tricked or defrauded into giving account access.
How quickly do I need to report an unauthorized transfer?
Consumers must generally report an unauthorized electronic fund transfer within 60 days after the financial institution sends the periodic statement showing the unauthorized transaction. Waiting longer than 60 days can expose you to much greater loss because the bank may not have to reimburse subsequent unauthorized transfers occurring after that 60‑day period.
How much can I be held liable for an unauthorized transfer?
If you notify your bank within two business days after learning of the loss or theft of your debit card or access device, your liability is typically capped at $50. If you wait more than two business days but less than 60 days from when your statement was sent, your liability can increase, up to a maximum of $500 in many situations.
What happens if I wait more than 60 days after my statement?
If you fail to notify the financial institution within 60 days after it sends the statement listing the unauthorized transfer, you may be responsible for all unauthorized transfers that occur after that 60‑day period until you notify the bank. This is why carefully reviewing your statements and immediately disputing any unfamiliar charges or withdrawals is critical.
What are my bank’s duties when I dispute a transfer?
Once you notify your bank of a possible error or unauthorized transfer, it must promptly investigate, typically within 10 business days, although it may take up to 45 days if it provides provisional credit during the investigation. The bank must report the results of its investigation, explain its decision in writing if it finds no error, and correct any confirmed error, usually within one business day after determining that an error occurred.
What if the bank refuses to investigate or blames me?
Financial institutions that fail to conduct a good‑faith investigation, ignore clear evidence of fraud, or improperly push liability back onto the consumer may violate EFTA and Regulation E. In addition to being required to correct the account, they may face liability for damages, statutory penalties, and in some circumstances triple damages when they knowingly and willfully disregard the law.
What compensation can I recover in an EFTA lawsuit?
Under EFTA, consumers can sue for actual damages (such as lost funds, overdraft fees, and consequential losses) plus statutory damages of between $100 and $1,000 in an individual action. Courts may also award costs of the action and reasonable attorneys’ fees, and where a bank fails to properly provisionally recredit or investigate in bad faith, the statute allows triple damages in some cases.
Can EFTA claims be brought as class actions?
Yes, EFTA expressly authorizes class actions, though total statutory damages in a class case are capped based on a percentage of the defendant’s net worth and an overall dollar limit. Class litigation is common where a bank or other institution uses uniform practices that systematically violate the statute, such as defective disclosures, failure to provide error‑resolution notices, or across‑the‑board denial of valid fraud claims.
Does EFTA apply to business accounts?
EFTA is primarily a consumer protection statute and applies to accounts established primarily for personal, family, or household purposes, not business accounts. Businesses defrauded through electronic transfers usually must rely on contract rights, state commercial law, or other federal statutes rather than EFTA.
How can your firm help with an EFTA problem?
The Law Offices of Robert J. Nahoum, P.C. is a New York consumer protection law firm that represents individuals in disputes with banks, debt collectors, auto dealers and other financial institutions. In an EFTA case, our firm can review your statements, evaluate your notice and timing, obtain and scrutinize the bank’s investigation records, and pursue negotiation or litigation to recover your losses and statutory damages.
What should I do if I see an unauthorized transfer on my account?
- Immediately call your bank and follow up in writing, keeping copies of all correspondence.
- Save your statements, screenshots, police report (if any), and any text, email or chat communications with the bank or suspected fraudster.
- Contact a consumer protection attorney experienced with EFTA and Regulation E to assess your rights, deadlines and potential claims
Protecting Consumers Against Financial Deception
If you need help recovering money lost to an impersonation scam, contact us today to see what we can do for you. With offices located in Brooklyn and the Hudson Valey, the Law Offices of Robert J. Nahoum represents consumers in cases throughout the Tristate area including New Jersey.
The Law Offices of Robert J. Nahoum, P.C
(845) 232-0202
www.nahoumlaw.com
info@nahoumlaw.com