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Modern banking affords customers with peace of mind. Picture this: A ne'er-do-well wipes out the funds in a bank customer's account. No problem. The Electronic Fund Transfer Act (EFTA) says that the bank will recredit the account if the withdrawals were unauthorized.
Before you start sweating the law on behalf of your banking clients, rest assured that the Eleventh Circuit Court of Appeals is a stickler for that "unauthorized" caveat.
The EFTA requires a bank to follow certain error correction protocols when a customer disputes a transaction. It must investigate the disputed transactions, notify the customer if it has verified the transactions as authorized, and recredit the account if the withdrawals were unauthorized. Failure to do so renders the bank liable to the customer for up to treble damages.
Here, Carline Merisier sued Bank of America (BofA) to recover for supposedly-unauthorized withdrawals from her checking account that were made using her check card and personal identification number (PIN). BofA investigated the withdrawals at issue in this case, concluded that Merisier had colluded with whomever had drawn down her account, and denied liability.
Merisier asserted that Bank of America failed to conduct a reasonable investigation of her claim, failed to follow EFTA's claim-resolution procedures, and unlawfully held her liable for unauthorized transactions. Accordingly, she claimed that she was entitled to recover actual damages -- the $15,775.76 withdrawn from her account -- trebled for willful EFTA violation.
There was a lot of evidence to support BofA's fraud theory, and the district court concluded that BofA had not committed an EFTA violation.
Merisier then argued to the Eleventh Circuit Court of Appeals that BofA did not do what EFTA required it to do with respect to transactions she claimed were in error because they were unauthorized. The Eleventh Circuit disagreed, noting, (again), that there was substantial evidence that Merisier was involved in a fraud scheme, and that a withdrawal does not become an "error" simply because a customer later disputes it.
An "error" under the EFTA is "an unauthorized electronic fund transfer." The Eleventh Circuit concluded that the EFTA error label did not apply to the withdrawals from Merisier's account because "Merisier furnished the means of access to her account voluntarily," either as a willing participant in a fraudulent scheme or as one duped by another person.
A bank is not obligated to replace unauthorized withdrawals if it determines though the proper error correction protocols that the account holder was a party to the withdrawals. If your banking client is fighting an EFTA violation lawsuit from a colluding client, the Eleventh Circuit Court of Appeals will likely rule in your favor.