A legal case involving how Citi responded to customers who had money stolen via wire transfers has caused a spat between the CFPB and industry associations over the scope of the Electronic Fund Transfer Act (EFTA).
Citi is being sued by the state of New York for failing to respond adequately when people promptly told the bank that scammers had stolen money by initiating wire transfers from their accounts online.
New York Attorney General Letitia James has alleged that because Citi makes wire transfers available to consumers online and through mobile banking apps, it must reimburse victims of fraud under the EFTA, similar to when banks reimburse victims of electronic credit or debit card fraud.
However, Citi has argued EFTA doesn’t apply because the scammers ultimately used a wire transfer to take the money, and the Act contains an exemption for transfers made by banks “by means of” a wire service.
Last week, Consumer Financial Protection Bureau general counsel Seth Frotman weighed in, revealing 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," says Frotman.
In response, The American Bankers Association, Bank Policy Institute, New York Bankers Association, and The Clearing House Association have issued a statement "correcting the record".
The organisations claim that CFPB is now departing from its prior guidance and says of the new position: "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."