The Electronic Funds Transfer Act: A Powerful But Often Overlooked Protections For Victims Of Debit Card Theft

Schlanger Law Group recently filed a lawsuit under the Electronic Funds Transfer Act (EFTA) in United States District Court for the Eastern District of New York City on behalf of a college student who was a victim of identity theft. The action is brought against Santander Bank. The EFTA is a lesser-known federal consumer protection statute that provides critical protections to victims of ATM or debit card theft.

The Scam: Steal The Debit Card; Make Bogus Deposits; Take Advantage Of Provisional Credits

In a disturbingly common scam, our client’s debit card was stolen and then used to make a series of fraudulent deposits into the victim’s account. When the funds provisionally cleared, the thief withdrew the money at an ATM machine, again using the victim’s card.

Of course, the checks deposited by the thief into the victim’s account were bogus and were eventually reversed, leaving the victim with thousands of dollars of withdrawals to cover from his own funds, and resulting in a negative balance.

Our client—a New York City resident—promptly and repeatedly disputed the bogus charges with his bank, including repeatedly filling out forms provided at his local branch, all to no avail.

We see this all the time. The banks all too often take the position that the charges must be legitimate because, after all, “whoever did this knew your pin”.

The EFTA To The Rescue: Strict Limits On Victim’s Liability For Unauthorized Debit Card Use; Burden Of Proof On The Bank

Luckily, the Electronic Funds Transfer Act provides important protections in such situations. Specifically, EFTA puts the burden of proof on the financial institution to demonstrate that challenged transfers were authorized and provides for strict limits on the consumer’s liability for unauthorized use of ATM or debit cards.

This act also provides important guidance on the types of evidence that a bank should consider in cases of debit card theft. The EFTA’s regulators have stressed that a person’s PIN being used is not sufficient to conclude that the use was authorized and that the banks need to conduct an actual investigation. Factors the banks can reasonably be expected to consider include:

Documentation or written signed statements provided by the customer;
Location of the transaction in relation to the customer’s residence, place of business, or normal shopping locations;
Historical information on the customer’s pattern of use (e.g. time, frequency, location, and types and amounts of transactions);
The customer’s location at the time of the unauthorized transactions;
Problems reported by other customers regarding the access device or ATM
Signature information on POS transactions;
Police Reports; and
Film from security cameras.

The EFTA’s liability limits are somewhat complicated and vary depending on whether the theft involved use of an ATM card or another “access device” and how quickly the unauthorized use was reported after it was discovered, but these rules are, nonetheless, quite consumer-friendly.

In general, where a transfer is unauthorized and reported within two business days, the consumer’s maximum liability should be between zero and fifty dollars. Even where the consumer waits more than 60 days, the consumer’s liability is typically capped at $500 with regard to transfers occurring within that 60-day period.

The Banks Don’t Like The EFTA And Often Pretend It Doesn’t Exist

All too often, banks ignore the EFTA’s clear provisions. Banks regularly:

(a) claim that use of the victim’s PIN number makes the victim responsible for the charges;

(b) claim that the victim is responsible for the charges because they weren’t careful with their card;

(d) falsely claim that the consumer “waited too long”.

These sorts of responses—which New York City consumers regularly experience—can have a devastating financial impact, and are inconsistent with the requirements of the Electronic Funds Transfer Act, which entitles consumers who are victims of violations to statutory damages of between $100 and $1,000 in actual damages, attorney’s fees, and costs.

Call An Attorney With Experience Litigating Electronic Funds Transfer Act Cases If You Have Suffered From ATM Fraud

If your debit card was stolen and the bank is trying to make you pay for the charges, the EFTA can provide powerful protection. Schlanger Law Group is one of only a few law firms in New York City that regularly litigate Electronic Funds Transfer Act cases on behalf of victims of debit card theft and other unauthorized debit card use. If you have a debit card theft problem, call us today.