Electronic Fund Transfer Act
The People of New York v. Citibank N.A.
Date: May 9, 2025
Issue: Does the Electronic Fund Transfer Act (EFTA) govern wire transfers?
Case Summary: ABA filed a coalition amicus brief urging the Second Circuit to grant Citibank’s petition for interlocutory review of a district court decision ruling the EFTA governs wire transfers.
The New York attorney general (NYAG) sued Citi, alleging it violated the EFTA for having insufficient online security measures to protect against scammers and unlawfully refusing 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, Citi 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. However, the Southern District of New York granted and denied Citi’s motion in part. The court concluded Subsection (7)(B) of the EFTA applies only to interbank fund movements, not consumer-initiated payment orders. Citibank moved the district court to certify its opinion and order for interlocutory appeal to the Second Circuit and to stay the action in the interim. ABA filed a coalition amicus brief supporting Citi’s motion, which the court granted on Apr. 25, 2025. On May 2, 2025, Citibank petitioned the Second Circuit for interlocutory review.
ABA’s most recent coalition amicus brief presented two main arguments. First, ABA argued that substantial grounds exist for differing opinions on whether the EFTA applies to online consumer wire transfers. It asserted that the district court misread EFTA’s statutory text by narrowly dissecting individual phrases instead of considering the statute’s overall structure and purpose. For example, ABA noted that this analytical method led the court to conclude that Congress “conspicuously omitted” reference to consumer wires from Subsection 7B. According to the court, for a transfer to fall within Subsection 7(B) it must be “made by a financial institution,” “on behalf of a consumer” and “by means of a service that transfers funds held at either Federal Reserve banks or other depository institutions and which is not designed primarily to transfer funds on behalf of a consumer.” The court emphasized that it was noteworthy that Congress chose to write “by a financial institution” rather than “by a consumer.” But ABA highlighted that the very next part of the same phrase explicitly referenced transfers “made by a financial institution on behalf of a consumer.”
ABA also argued that the court misinterpreted Section 7(B), rendering it meaningless and ignoring Congress’s intent. Because EFTA applies only to consumer accounts, not interbank transfers between institutional accounts, ABA contended that the court improperly expanded EFTA’s scope.
Second, ABA argued interlocutory review is particularly appropriate in light of the dramatic consequences of the court’s admittedly novel decision. ABA warned that if the court’s decision stands, it could inject major uncertainty, impose heavy compliance burdens, and possibly force banks to limit or eliminate online wire transfer options for consumers. ABA explained the financial industry has long structured its operations around a settled legal understanding that excluded wire transfers from EFTA’s scope. The court’s decision disrupted that framework, creating significant uncertainty and forcing ABA’s members to consider costly changes to their online funds transfer systems.
Bottom Line: Due to associated costs and risks, ABA emphasized that prompt appellate review is crucial to prevent unnecessary disruptions for its members and the consumers they serve.
Documents: Brief
