Electronic Funds Transfer Act

Serving Clients Nationwide

Like most Americans, you probably use your debit card to buy everyday items like groceries or gas. You probably also stop at an ATM to withdraw funds from your bank account before you go to an event or on vacation. Many people now use popular apps like Venmo and Zelle to split their dinner tab with friends. If you make any of these types of transactions, you should be familiar with the Electronic Funds Transfer Act (EFTA) and your rights under that law.

A 2021 study by Business Insider revealed that 65% of Americans use mobile banking and almost 80% prefer electronic banking instead of visiting a bank in person. A survey performed by Ipsos-Forbes found 76% of US adults preferred using their bank’s mobile banking app while 97% of Millennials regularly used mobile banking in 2021. These transactions are a part of our routine everyday lives. 

In response to the increase in electronic transfers, Congress enacted the Electronic Fund Transfer Act (EFTA) and “Regulation E” in order to protect consumers from unauthorized and fraudulent electronic transfers. Our team of EFTA lawyers are here to help if you are facing one of these unfortunate situations.

What Situations are Covered by the Electronic Fund Transfer Act? 

Before 1978, the laws that dealt with banking transactions protected banks’ rights and obligations. Consumers had no recourse when money was taken from their accounts without their authority. Today, things are different. 

As cybercrime and identity theft grew, consumers needed protection. The Electronic Funds Transfer Act (EFTA) was created to protect consumers who use electronic banking systems. The law is enforced by the Consumer Financial Protection Bureau following Regulation E, which provides a detailed explanation of the EFTA including which situations and entities are covered. 

Transfers Covered by the EFTA – Regulation E 

The EFTA only applies to certain electronic fund transfer (EFT) situations. The transfer must be unauthorized, involving an individual (not business) account, and electronic.  

“Unauthorized” EFTs have three elements you must prove as the consumer: 

• The transfer must be made by someone other than the account holder; 
• The person who makes the transfer does not have lawful authority to do so; and 
• The account holder receives no benefit. 

If you have voluntarily disclosed your PIN or given your ATM card to a trusted person and they transfer your money, those transfers will not be considered “unauthorized,” and the EFTA will not apply. 

The transfer must involve an individual account. To be protected under the EFTA, the account must be used for family, household, or personal purposes only. Commercial or business accounts are not covered by the EFTA.  

The transfer must be an Electronic Fund Transfer (EFT). Online banking transfers, bill-pay, mobile banking, payment apps, and other strictly electronic forms of moving money are covered by the EFTA. Transactions that do not fall under the act include payment by check or other paper means; transfers, including wire transfers, between two businesses or two banks; transfers of money to buy commodities or securities; and transfers within the same bank if authorized by the account holder. 

How Does the Electronic Fund Transfer Act Protect Consumers? 

Before the EFTA, a consumer had no rights if someone removed money from their account without authority, even if the account holder was a victim of fraud or identity theft. However, under the EFTA, consumers now have legal remedies including reimbursement of the transferred funds. 

If you discover an unauthorized transfer in your personal account and act quickly, you can limit your potential losses. In very general terms, the sooner you notify your bank about unauthorized transactions, the more protection you will receive.