Unauthorized Electronic Transfers Claims Under the UCC and EFTA

Did you notice electronic funds transferred out of your bank account? Did you authorize these transfers? If your answers are yes and no, respectively, you need to reach out to an Unauthorized Electronic Funds Transfers lawyer in New York, like the lawyers at Malecki Law, to review your circumstances.

A threshold determination is whether the account at issue is a consumer account or a commercial/business account. This is because the law generally treats these types of accounts differently. There are two potential avenues for recourse, the Electronic Funds Transfer Act (EFTA) for consumer accounts and Article 4A under the Uniform Commercial Code (UCC) for commercial accounts. Notably, the UCC generally does not apply to scenarios which the EFTA governs. See § 4A-108. Relationship to Electronic Fund Transfer Act for more. You need to have a law firm well-equipped to analyze which law may govern, such as an Unauthorized Electronic Funds Transfers law firm like Malecki Law in New York.

Claims Under the EFTA

To be able to bring a claim under the EFTA, the bank account at issue must be a consumer account. Further, the bank or firm that your consumer account is held at must fit the definition of a financial institution under the statute. Newer crypto-based firms may not fall under this definition. Then, you must make the financial institution aware of the unauthorized transfer within sixty days after a customer notice (that identified the unknown transfer) was made. After making the financial institution aware of the unauthorized transfer, the financial institution must determine whether an error occurred and caused this unauthorized transfer. The financial institution must notify you of its conclusion within the following ten days. After this, there are specific situations in which the financial institution must fix the issue or credit your account, otherwise you may be able to bring a claim under the EFTA as a consumer victim. An Unauthorized Electronic Funds Transfers law firm based in New York, like Malecki Law, can review your situation to discern whether you may have a claim under the EFTA. Please see Malecki Law’s related blog post, where we further explained the EFTA, its background, and related analysis.

Claims Under Article 4A of the UCC

There are two overarching questions to keep in mind when bringing a claim under Article 4A of the UCC. The first is whether the bank’s security procedures were “commercially reasonable.” The second is whether the bank acted in “good faith” following those security procedures. If a bank did not have commercially reasonable security measures in place and/or did not act in good faith, you may have a claim under the UCC. The inquiry into whether a bank’s security procedures are commercially reasonable is generally a question of law, determined on a case-by-case basis. Regatos v. N. Fork Bank, 257 F. Supp. 2d 632, 646 (S.D.N.Y. 2003). You need a skilled attorney at an Unauthorized Electronic Funds Transfers law firm, like the lawyers at Malecki Law in New York, to review your account to see if you have a claim under Article 4A of the UCC.

New York’s Attorney General’s Investigation into Citibank

New York State’s Attorney General is currently investigating mass unauthorized transfers of electronic funds. Specifically, on January 30, 2024, the Office of the Attorney General (OAG) filed a complaint against Citibank, regarding substantial unauthorized transfers of funds from customer accounts. In the OAG’s press release about the complaint, Attorney General James pointed out that banks are expected to be the “safest place” for customers to keep their money, but, instead, “Citi’s negligence allowed scammers to steal millions of dollars from hardworking people.” The press release further indicated that Citibank’s security procedures were too relaxed, and its systems were unable to respond to red flags, which allowed for the unauthorized transfers of electronic funds to occur. The complaint goes into further detail about the application of the law. In its complaint, the OAG relied on EFTA as the victims are consumers. However, the OAG indicated that Citibank relied on the UCC, arguing it executed transactions in good faith and that the security procedures were commercially reasonable. This will be an interesting case to watch closely as it is ongoing.


Contributions by Jacqueline N. Candella, Associate at Malecki Law

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