Pre-authorized transactions are a common and convenient way for consumers to manage bills and subscriptions. Services from credit card to entertainment companies offer (and emphasize) auto-billing as a guarantee that you’ll never miss a payment. However, authorizing any institution to withdraw money from a personal account automatically can pose risks.
What is the EFTA?
Congress enacted the Electronic Fund Transfer Act (EFTA) in 1978 to establish the rights and liabilities of consumers and the responsibilities of businesses engaged in electronic funds transfers. The legislation emerged with the rise of new banking technologies, such as the ATM, and has undergone several updates in the past 40 years.
Today, the EFTA applies to many services including:
- ATMs
- Direct Deposit
- Pay-by-phone
- Internet transactions such as checking account activity, paying bills and transferring funds.
- Debit card purchases online or in person
- Electronic check conversion (mobile deposit)
Disclosures
The EFTA requires financial institutions to provide important transaction information before any transfer occurs. For example, a bank must inform ATM users if a fee applies for using their machines. Other required disclosures include but are not limited to:
- Consumer liability for unauthorized electronic funds transfers
- Telephone and address of the person/office to whom you can report unauthorized transactions
- Any charges/fees associated with electronic fund transfers
- The consumer’s right to stop payment of a preauthorized transaction (and how to do so)
- Upcoming changes to consumer accounts
Fraud
Have you ever experienced a lost or stolen credit card? The EFTA provides specific protections for consumers against liability for fraudulent charges.
For unauthorized charges involving a lost or stolen credit or debit card, customers have 60 days to report the issue. If the card is reported immediately, the consumer is not liable for any future unauthorized charges. Once notified, the financial institution has 10 business days to investigate your claim. If the institution refuses to credit your account, you could sue for EFTA violations.
Damages could include the lost money and punitive damages ranging from $100 to $1,000. However, failure to notify a financial institution within 60 days could result in full liability, meaning the customer cannot recover losses or file suit.
Unauthorized Withdrawals
Similar to debit and credit card fraud, the Electronic Fund Transfer Act (EFTA) plays a crucial role in consumer protection. It is especially beneficial in situations where there is an established relationship between your financial institution and a subscription service you are using. In cases where payment for that service is deducted from your account without your explicit consent or authorization, this act allows you to dispute those transactions. Therefore, if you notice any unauthorized deductions related to your subscription service, you can take steps to resolve the issue, potentially recovering your lost funds and preventing future unauthorized charges. The EFTA helps protect consumers from potential financial setbacks, emphasizing the importance of consent regarding account debits and financial transactions.
Nationstar Class Action
In early 2021, mortgage servicer Nationstar initiated tens of thousands of unauthorized withdrawals from its customers. The company attributed the glitch to its payment processor, ACI, but Nationstar charged some customers as much as $50,000 in one day. Maginnis Howard has filed class action lawsuits in five states, including North Carolina, on behalf of consumers impacted by Nationstar and its payment processor, ACI Worldwide.
The EFTA stipulates that financial institutions must “provide reasonable advance notice to the consumer… of the amount to be transferred and the scheduled date of the transfer.” Nationstar did not provide any warning about the deductions made from consumer accounts. Although Nationstar credited the appropriate amount to the account holders within the following days, complications arose from the incident. The consumers were deprived of their property, unable to make other payments, and savings accounts could not accrue interest.
Electronic Fund Transfer Act Attorneys
Electronic services are an essential part of everyday commerce. When properly executed, these transfers make retail transactions and banking much easier. However, when the contract between the purchaser and the service provider is violated, the consequences can be significant.
If a service provider or financial institution has wrongfully withdrawn funds from your account, we may be able to assist you. The experienced consumer protection attorneys at Maginnis Howard have won cases against large corporations totaling millions of dollars. Our results speak for themselves, and our clients are our top priority. Contact us today for a free consultation. We represent clients across the Carolinas from our Charlotte, Raleigh, and Fayetteville offices.
