info@carolinalaw.com
info@carolinalaw.com
Finding an unauthorized charge on your financial statements can be an overwhelming and stressful experience. Whether you don’t recognize the charge altogether or you were charged for something you had cancelled, you must act quickly. Your consumer rights provide strong protections for unauthorized charges of any kind, including fraud. Financial institutions and vendors must have your explicit authorization before debiting any account. When an unrecognized transaction hits, you don’t have to handle it alone. The dedicated consumer lawyers at Maginnis Howard have recovered millions for those suffering from unauthorized charges and fraud.
The Electronic Fund Transfer Act (EFTA) of 1978 is a federal law that outlines and protects the rights of consumers involved in electronic fund transfers (EFTs). It establishes regulations to ensure the security, transparency, and fairness of electronic transactions, including ATM withdrawals, debit card transactions, and electronic bill payments. The act also orders financial institutions to disclose terms such as fees and conditions related to EFTs, as well as procedures for reporting errors and unauthorized charges.
If, for any reason, payments are deducted from your bank account without your explicit consent or prior authorization — for example, due to a billing error or unauthorized charge — the EFTA provides you with the right to dispute these transactions. This means you can challenge unauthorized or fraudulent charges to reverse the deductions and recover stolen funds. The EFTA safeguards consumers regarding electronic financial transactions, much like the protections offered by laws against debit and credit card fraud. This act is particularly significant when there is an ongoing relationship between your financial institution and a subscription service or merchant you are using.
When the EFTA was first passed, the types of electronic fund transfers were limited. Today, a wider range of transactions fall under this category. Over the more than 40 years this law has existed, several updates have broadened its scope. The protected transactions include:
Even though electronic transfers are overwhelmingly popular today, certain transactions are not considered EFTs by the EFTA. Examples of transfers not covered by this act include wire transfers, paper check transactions, or prepaid cards. The recourse for fraud in these instances does not come from the EFTA. If you experience fraud or unauthorized charges for non-electronic funds, your best course of action is to pursue criminal charges.
The EFTA orders that financial institutions and third-party service providers disclose certain information to their customers. For example, a bank must notify ATM users if a fee applies for using their machines. Other key disclosures include:
Pre-authorized transactions are a popular and convenient method for consumers to handle bills and subscriptions. From credit card providers to entertainment companies, many industries promote auto-payments to keep consumers on the hook. Nonetheless, granting any institution permission to withdraw funds automatically from a personal account can carry certain risks.
In 2021, mortgage servicer Nationstar (Mr. Cooper) began making tens of thousands of unauthorized withdrawals from its customers. The company blamed the issue on its payment processor, ACI, but some customers were charged as much as $50,000 in a single day. Maginnis Howard attorneys filed class action lawsuits in five states, including North Carolina, representing consumers affected by Nationstar and ACI Worldwide.
The lawsuit exemplifies a clear violation of the EFTA. The law demands that financial institutions “provide reasonable advance notice to the consumer… of the amount to be transferred and the scheduled date of the transfer.” Mr.Cooper/Nationstar did not warn about the deductions from consumer accounts. Although Nationstar credited the correct amount to the account holders in the following days, the incident caused complications. Those consumers were deprived of their property, unable to make other payments, and their savings accounts could not earn interest.
Fraud is an increasingly prevalent consequence of electronic banking. In 2024, the FTC received 2.6 million reports of fraud, 40% of all reports to the Consumer Sentinel Network that year. Fraud takes many forms, and consumers are exposed to more vulnerabilities in an increasingly digital world.
Identity theft is a type of fraud that can take many forms. When thieves use stolen information to make unauthorized transactions, it can be devastating. The EFTA provides protections from certain circumstances of identity theft that can help you recover your losses from unauthorized charges.
Social engineering scams occur when an imposter posing as a financial institution contacts a consumer to gain access to their accounts or convince them to move funds. In 2024, Coinbase customers were contacted by cybercriminals by phone, who then convinced them to move their cryptocurrency. These schemes are becoming more popular, and victims can lose their life savings to a con. If you were the victim of a social engineering attack, you will need an experienced EFTA lawyer on your side.
It can be daunting to deal with charges that you don’t recognize. When you do, it’s important to stay calm and know your rights.
Review your credit reports and other accounts for discrepancies. Especially in fraud cases, double-checking your other accounts and credit for signs of identity theft is essential.
Contact an experienced unauthorized charges lawyer. Maginnis Howard’s lawyers specialize in Electronic Fund Transfer Act cases, including fraud or unauthorized transactions. Our attorneys will guide you through the legal process so you can focus on rebuilding.
Since the EFTA was passed in 1978, technological advances have created many more vulnerabilities for consumers. In recent years, Congress has passed additional legislation to supplement the original law.
In 2009, Congress enacted the Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act). This act significantly impacted the EFTA by adding stronger disclosure requirements for payment methods, such as gift certificates, store gift cards, and general-use prepaid cards. The Act limits specific fees for these cards and establishes a minimum of five years before the funds on these cards can expire. This rule has limited exceptions, but these changes significantly strengthened the regulations on this type of EFT.
The landmark Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) aimed to reform the US financial system in the wake of the 2007-2008 financial crisis. In 2011, it further reinforced and expanded the EFTA. The Act transferred rulemaking authority from the Federal Reserve to the Consumer Financial Protection Bureau (CFPB). It amended regulations regarding remittance transfers, a type of money transfer sent electronically to a foreign country from the United States.
Large corporations handle billions of dollars of consumer funds daily and must ensure their customers’ finances are secure. When a violation of the EFTA occurs, consumers have the right to hold these institutions accountable. Damages may include lost funds and punitive damages between $100 and $1,000. However, if a customer fails to notify a financial institution within 60 days, they could be held fully liable, preventing recovery of losses or filing a lawsuit. Some companies, such as Navy Federal Credit Union, have faced several unauthorized charges lawsuits for failing to refund consumers even if they notified the bank of the fraud. If this happens, contact Maginnis Howard immediately for assistance.
Dealing with the consequences of financial losses can be a significant burden. Whether your loss is the result of fraud or unauthorized charges by a vendor, you don’t have to handle it alone. Our experienced attorneys help you hold the appropriate party accountable and recover compensation. If your EFTA rights have been violated, contact us today.
The electronic transfer of funds has become a central part of everyday commerce in the United States. When carried out correctly, these transfers simplify retail transactions and banking. However, if the agreement between the buyer and the service provider is breached, the results can be serious.
Contact us today if a service provider, financial institution, or other entity has wrongfully withdrawn funds from your account. The experienced consumer protection attorneys at Maginnis Howard have recovered millions from large corporations that have violated consumer rights. Contact us today for a free consultation with our skilled legal staff. We represent clients across the Carolinas from our Charlotte, Raleigh, and Fayetteville offices.
There is intense debate about cryptocurrency and the EFTA. The CFPB proposed a rule in January 2025 to codify cryptocurrency as a protected form of electronic funds. That same year, a judge upheld crypto as an EFT, however, crypto companies are pushing back against this ruling.