A high-stakes legal battle has erupted between Citi and New York’s Attorney General, causing a fierce dispute between the Consumer Financial Protection Bureau (CFPB) and prominent banking industry groups. The contention centers on how the Electronic Fund Transfer Act (EFTA) should be applied to wire transfers.
New York Attorney General Letitia James has sued Citi, alleging the bank failed to adequately reimburse customers who fell victim to online wire transfer fraud. According to James, because Citi enables wire transfers via its online and mobile banking platforms, it should be held accountable under the EFTA, much like electronic credit or debit card fraud cases.
Citi, however, contends that the EFTA does not cover wire transfers, citing an exemption for bank-conducted transfers made “by means of” a wire service.
In a dramatic turn, CFPB General Counsel Seth Frotman disclosed that the bureau has submitted a Statement of Interest. “When a bank connects wire transfer capabilities to its online consumer banking platform and a person authorizes (or a scammer purports to authorize) a transfer online, the Electronic Fund Transfer Act applies to the transaction except for the bank-to-bank portion of it,” Frotman stated.
This stance has provoked a sharp response from the American Bankers Association, Bank Policy Institute, New York Bankers Association, and The Clearing House Association. These organizations issued a statement accusing the CFPB of departing from its previous guidance, asserting, “The CFPB has the law wrong here: Wire transfers are excluded from the Electronic Fund Transfer Act. The CFPB cannot reinterpret a statute and reverse decades of settled law in an amicus brief and then use a blog post to suggest that its position is the law.”
This unfolding legal saga not only highlights the complexities of digital banking fraud but also sets the stage for a broader debate on regulatory interpretations that could have far-reaching implications for the banking industry.
