ELECTRONIC FUND TRANSFER ACT (EFTA)

If Your Bank or Other Financial Institution Refused to Return Your Money After Fraud, You May Have Options

You log into your banking app and something is off.

There are charges you don’t recognize, or a transfer you know you didn’t make. You don’t know whether it was a bank error or a bad actor that fraudulently gained access to your account. But you know it wasn’t you.

You report it right away. You call the bank, explain what happened, and follow whatever process they give you. For a while, it feels like it’s being handled.

Then the response comes back: your claim has been denied.

The explanation — if there is one — is usually short and frustrating. It might say the transaction was “authorized,” or that there wasn’t enough evidence of fraud. Either way, the result is the same, and you’re left without your money or a clear path forward.

Most individuals stop there because it feels like the bank has the final say. In reality, that’s often not the case. The Electronic Funds Transfer Act (“EFTA”) provides protections for unauthorized errors and account errors, and can provide consumers with a powerful weapon when things go wrong.

IMPORTANT: The information provided below is not legal advice. EFTA and its implementing regulation (Regulation E) are complicated and this page only provides an overview that may not address your specific situation. Please contact us if you would like to discuss your specific situation with an attorney.

EFTA Protects Consumers From “Unauthorized” Electronic Fund Transfers

The EFTA requires financial institutions to investigate and reimburse consumers for certain unauthorized electric fund transfers. To be entitled for reimbursement, the consumer must notify the financial institution of the theft or loss within 60 days of receiving the periodic statement that shows the unauthorized transfer.

An “unauthorized” transfer is a transfer from a consumer’s account initiated by a person, other than the consumer, without actual authority to initiate the transfer and from which the consumer receives no benefits. Unauthorized transfers include:

• A fraudster uses false representations to trick you into providing information that the fraudster uses to access your online financial account.
• A hacker accesses your access credentials through email phishing (emails that are designed to deceive consumers into providing sensitive information).
• A thief makes withdrawals from an ATM using a stolen debit card and PIN.
• Someone uses your lost or stolen phone to make transfers through a payment app.

The EFTA only applies to electronic money transfers, which are transfers made through electronic means (computer, phone, ATM, etc.) It does not apply to checks, cashier checks, wire transfers, or the buying or selling of securities or commodities.

What the Law Requires Banks to Do

When a problem is reported, the bank must promptly conduct a reasonable investigate. In some situations, banks may also be required to provide provisional credit while the review is ongoing, depending on the timing and nature of the report.

In the event of an error or theft covered by the EFTA, the bank is responsible for refunding the money taken from the account, including interest. The bank must refund the money within 1 business day of concluding the investigation. Depending on when the bank received notice of the error or theft, the consumer may be responsible for up to $50 or $500 of the amount. But if the consumer provided notice within 60 days, the most the consumer is responsible for is $500; the bank must refund the rest.

If a claim is denied, the bank must provide a written explanation of the results of its investigation, within three business days after completing its investigation. The explanation should reflect an actual evaluation of the information available, not just a broad or generic conclusion. The explanation must note that the consumer has the right to request the documents that the institution relied on in making its determination. If you request these documents, the bank must promptly provide copies of them.

The EFTA provides consumers with the ability to fight back when the bank gets it wrong or performed an inadequate investigation. 

Talk to Us

If you are the victim of an unauthorized transfer, or your bank has refused to return your money after being notified about a fraudulent transfer or error, we can take a closer look at what happened and help you understand where things stand.

You don’t have to sort through it on your own.

Contact Conn Law, PC to schedule a no-cost consultation.