CA Federal Court Finds that EFTA Does Not Apply to Consumer Wire Transfers

The U.S. District Court for the Northern District of California recently concluded that the Electronic Fund Transfer Act (EFTA) does not apply to consumer wire transfers because, as several other courts have recognized, the plain language of the statute and its implementing regulation expressly excludes wire transfers.

On receiving an email notifying him of a $110,000 wire transfer from an online savings account (which he believed to be fraudulent), the plaintiff–account holder disputed the transaction with the defendant-bank. But because the bank’s internal security measures did not flag the transaction as suspect, the bank declined to refund the plaintiff for the purportedly fraudulent transaction.  The plaintiff then sued the bank, alleging, among other claims, that the wire transfer was an “unauthorized electronic fund transfer” in violation of EFTA.

The court dismissed the EFTA claim, reasoning that EFTA does not apply to consumer wire transfers.  As the court observed, EFTA’s definition of “electronic fund transfers” expressly does not include “any transfer of funds . . . made by a financial institution on behalf of a consumer by means of a service that transfers funds held at . . . depository institutions and which is not designated primarily to transfer funds on behalf of a consumer.”  EFTA’s implementing regulation also states that the term “electronic funds transfer” does not include “[w]ire or other similar transfers.”  And the only two appellate courts to confront the issue — though neither holding is binding on the court here — and every district court in the circuit has reached the same result.

The court also dismissed the two other claims, which resulted in the dismissal of the case in its entirety.