Round One Victory Against Capital One For Unauthorized Transfers in Imposter Scams

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Schlanger Law Group Obtains First Published Decision Nationwide Holding That Victims Of Imposter Scams Are Entitled To Protection Under Federal Consumer Protection Statute

The number of reported financial imposter scams, fraud, and identity theft cases is rising at an alarming rate. The Federal Trade Commission’s Consumer Sentinel Network study indicated 325,000 fraudulent acts in 2001, but that number jumped to more than 4.72 million incidents last year.

Keep in mind, the FTC’s study only gathers data about the fraud situations that consumers report. The actual number of illegal acts is undoubtedly much higher.

How Imposter Scams Harm Consumers

In 2020, almost 500,000 imposter scams resulted in nearly $1.2 billion stolen from consumers victimized with new and more ingenious cons. Many scenarios involved criminals impersonating customer service representatives to obtain account data and fraudulently stealing from the victim’s financial account.

Some victims are fighting back. 

The Schlanger Law Group recently brought a lawsuit against Capital One, N.A. on behalf of one such consumer. Our client simply wanted to transfer money from his account at Capital One to a friend through a mobile app. When the transfer didn’t work, our client contacted the app’s online customer service phone number.

Thinking he was speaking with a legitimate customer service representative, our client provided information to complete the transfer. However, the other person on the call was an imposter who used the information to make several unauthorized transfers. Once our client realized his problem, he contacted Capital One to file a report.

Financial Institutions Must Respond to Fraud Situations

At first, Capital One refunded the money that was stolen from the account, however, it later reversed the refund and claimed our client was responsible for the activity. As a result, we filed a complaint alleging Capital One had violated the federal Electronic Funds Transfer Act (EFTA) along with New York’s general business laws. 

The complaint included two EFTA arguments:

  1. When Capital One reversed the refund it violated the EFTA section that limits a consumer’s liability (and loss) for unauthorized transfers to $50, and
  2. The EFTA requires financial institutions to investigate alleged fraudulent transfers but Capital One did not.

In response, Capital One filed a motion to dismiss the complaint claiming:

  • The transfers from our client’s account were not unauthorized, and
  • Our client waited too long to report the transfer to limit his losses.

The U.S. District Court analyzed the relevant law and ruled that our client’s situation was an unauthorized transfer because it was initiated by a person who obtained access to the account through fraud. Also, since our client notified Capital One the day after the fraud occurred, he was protected by the EFTA section that limited his losses to $50.

In the court’s published opinion, the first of record to apply the EFTA to imposter scams, Capital One’s request to dismiss the case was denied and we now have the chance to present evidence and demand statutory damages, out-of-pocket damages, attorneys fees, and possibly punitive damages. 

We Fight For Consumers Facing Imposter Scams

The team at Schlanger Law Group has extensive experience bringing claims in state and federal court on behalf of class action groups and individual consumers victimized by fraud, identity theft, inaccurate credit reporting, unauthorized bank transactions, and imposter scams. We’ll take on the big financial institutions that don’t protect consumers against fraud and unauthorized transfers.

Call us at (212) 500-6114 or complete our simple online form to schedule a free case consultation today. 

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