Banking and Finance Law Daily Wrap Up, CHECKS AND ELECTRONIC TRANSFERS—Banking groups challenge CFPB claim that EFTA covers unauthorized wire transfers, (May 31, 2024)

By Jonathan Anderson

The volley of arguments come amid a lawsuit brought by New York’s attorney general against Citibank.

Multiple banking groups are challenging a Consumer Financial Protection Bureau blog post that says the Electronic Fund Transfer Act (EFTA) provides protections to consumers from unauthorized wire transfers. On May 30, 2024, the American Bankers Association, Bank Policy Institute, New York Bankers Association, and The Clearing House Association issued a joint statement disputing this claim. The banking groups say such wire transfers are governed instead by Article 4A of the Uniform Commercial Code (UCC), which is more permissive than the EFTA. Both sides advanced these positions in ongoing litigation brought by the State of New York against Citibank.

CFPB’s blog post. On May 29, 2024, the CFPB published a blog post entitled “Banks’ responsibility for scams.” The post detailed the Bureau’s submission of a Statement of Interest in a lawsuit alleging Citibank, N.A., unlawfully denied consumers’ claims following scams infiltrating online and mobile banking that allegedly resulted in unauthorized transfers. The CFPB expressed disagreement with Citibank’s argument that the EFTA, which limits a consumer’s losses to $50, does not apply to the unauthorized transfers at issue in the case (see Banking and Finance Law Daily, May 30, 2024).

In the blog post and Statement of Interest, the CFPB explained that when a bank connects wire transfer capabilities to its online consumer banking platform and a person authorizes—or a scammer purports to authorize—a transfer online, the EFTA applies to the transaction. Only the wire portion of the transfer is excluded from the EFTA and Regulation E coverage, according to the CFPB. Further, the Bureau said in the blog post and Statement of Interest that the UCC was intended to govern transactions between commercial entities and does not provide the same level of commercial protection to victims of scams. “The CFPB will keep working to ensure that banks and other financial institutions meet their legal obligations, including protecting people from scammers,” the blog post read.

Banking groups’ response. The banking groups said in their joint statement that the EFTA expressly does not apply to wire transfers, and that Article 4A of the UCC is the only legal framework that controls. “The CFPB has the law wrong here: Wire transfers are excluded from the Electronic Fund Transfer Act,” the banking groups said. “The CFPB cannot reinterpret a statute and reverse decades of settled law in an amicus brief and then use a blog post to suggest that its position is the law. The Bureau is supposed to be educating consumers, not confusing them.” The joint statement follows amicus brief the groups submitted in the case.

Companies: American Bankers Association; Bank Policy Institute; Citibank, N.A.; New York Bankers Association; The Clearing House Association

RegulatoryActivity: CFPB ChecksElectronicTransfers CreditDebitGiftCards EnforcementActions NewYorkNews StateBankingLaws UDAAP