Electronic Fund Transfer Act
The People of New York v. Citibank N.A.
Date: Feb. 25, 2025
Issue: Whether the Southern District of New York should certify its order for interlocutory review.
Case Summary: ABA filed a coalition amicus brief urging the Southern District of New York to allow an interlocutory appeal of its decision that refused to dismiss the New York attorney general’s wire-transfer Electronic Fund Transfer Act (EFTA) claim.
The New York attorney general (NYAG) sued Citi alleging it violated the EFTA because it lacked sufficient online security measures to protect against scammers and unlawfully refused to reimburse them for fraud losses from wire transfers. Under the EFTA, consumers may dispute outgoing electronic payments and receive refunds for unauthorized withdrawals. According to NYAG, the bank did not use strong enough data security measures to protect consumer financial accounts, respond appropriately to red flags, or limit theft by scam. NYAG also claimed Citi reacted ineffectively to fraud alerts, misled consumers, and summarily denied their claims. Citi moved to dismiss, arguing the EFTA does not apply because Article 4A of the Uniform Commercial Code (UCC) governs wire transfers.
The Southern District of New York granted in part and denied in part Citibank’s motion to dismiss NYAG’s lawsuit. The court denied Citi’s motion to dismiss NYAG’s claim that the bank violated the EFTA by failing to protect consumer wire transfers. Citi argued that Subsection (7)(B) of the EFTA exempts such transfers from EFTA coverage, but the court ruled the exemption applies only to interbank fund movements, not consumer-initiated payment orders.
In its brief supporting Citibank, ABA urged the court to certify its order for interlocutory appeal because the elements are satisfied. First, ABA argued there is substantial ground for difference of opinion as to whether online consumer wire transfers are subject to the EFTA. ABA argued that both the text and context of Section 7(B) support exempting the entire transfer. The EFTA defines an “electronic fund transfer” as one initiated through an electronic terminal to instruct a financial institution to debit or credit an account. ABA emphasized that Section 7(B) mirrors Section 7 by using the phrase “any transfer of funds” to describe consumer-initiated transfers excluded from the EFTA’s scope. Because statutory terms should have consistent meanings, ABA argued Section 7(B) should be read as referring to the same transfers as Section 7 except those made via wire services, which demonstrates Congress’s intent to exclude consumer-initiated wire transfers from EFTA coverage.
ABA also argued that decades of case law and regulatory guidance contradict the court’s decision, highlighting Stepakoff v. IberiaBank Corp. as a key example. There, the court held that Section 7(B) barred an EFTA claim based on a failed wire transfer request. However, under the current ruling, the EFTA would apply to the same request, creating a direct conflict. ABA stressed that this inconsistency creates legal uncertainty and forces its members to navigate conflicting interpretations across jurisdictions.
Finally, ABA argued that interlocutory review is warranted given the dramatic impact of the court’s novel decision. For decades, ABA members have depended on established case law and regulatory guidance confirming that wire transfers — aside from certain cross-border remittances — are not classified as electronic fund transfers under the EFTA and Regulation E but instead fall under Article 4A. The brief emphasized that this long-standing framework has shaped financial institutions’ operations, pricing, and policies. In effect, the court’s order disrupts this settled regime, creating uncertainty that could force costly operational overhauls or lead banks to restrict online wire transfers, thereby limiting consumer access. Prompt appellate review, ABA argued, is essential to prevent such disruptions.
Bottom Line: Initial conference is set for March 13, 2025.
Documents: Brief
