Unreported / Non-Citable
Background
Plaintiffs Ricky Chen and Amin Wu, who sue on behalf of a putative class, allege that in September 2024 a fraudster posing as Bank of America personnel obtained remote control of Mr. Chen's iPhone during a FaceTime call. Mr. Chen allegedly believed he was only sharing his screen. Plaintiffs allege the fraudster then used the bank's mobile app to initiate two electronic transfers, $78,000 and $28,000, from their accounts to an external Chase account. They allege they called the bank within minutes, and that the bank repeatedly denied their claims, saying the transactions were confirmed as valid or made on a device consistent with prior activity. They further allege the bank treated the transfers as wire transfers governed by Article 4A of the Uniform Commercial Code rather than the Electronic Fund Transfer Act (EFTA). These are allegations, accepted as true only for purposes of the motion.
The court had earlier dismissed the original complaint with leave to amend because it did not adequately allege an unauthorized transfer. Plaintiffs filed an amended complaint, and the bank moved to dismiss again. It argued that the EFTA excludes any transaction involving a wire transfer and that plaintiffs still had not pleaded an unauthorized transfer. The EFTA generally caps consumer liability for timely reported unauthorized electronic fund transfers at $50 and imposes investigation duties on banks. Section 1693a(7)(B) excludes certain wire-type transfers, and Article 4A does not apply to a funds transfer any part of which the EFTA governs.
The Court’s Holding
The court denied the motion to dismiss. Of three possible readings of the statute, it adopted the one under which the EFTA covers an electronically initiated transfer from a consumer account, while Section 1693a(7)(B) removes only the interbank wire segment. The EFTA therefore applies to the first segment (the debit of plaintiffs' accounts) and the third (the recipient bank's credit to its customer), but not to the bank-to-bank wire itself.
The court reasoned that 'transfer of funds' can carry the same ordinary meaning in both provisions even though their qualifiers differ. It gave the surplusage argument little weight, because Section 7(B) can clarify that in-person consumer wires, the kind common in 1978, are outside the Act, and because the EFTA contains other redundancy. A narrower reading would leave some ACH transfers uncovered. The court followed decisions from the Southern District of New York, the District of Utah and the District of South Carolina, found a contrary Northern District of California decision unpersuasive, and distinguished the bank's authorities as involving in-person wires or arguments not made. Congress's consumer-protection purpose, the text of Article 4A and Federal Reserve commentary supported the result. Later agency and consumer-guidance statements were treated as non-binding and attenuated.
On authorization, the court held that plaintiffs plausibly alleged an unauthorized transfer. Drawing inferences in their favor, Mr. Chen unknowingly granted remote access, and inadvertent access does not give the fraudster 'actual authority.' Transfers that a consumer is induced to initiate himself are treated differently.
Key Takeaways
- At the pleading stage, this order holds that the EFTA applies to the consumer-account segments of an electronically initiated transfer even though the funds later moved by interbank wire.
- On the court's reading, the wire exclusion removes only the bank-to-bank wire segment, which remains outside the EFTA and is governed by Article 4A.
- Unauthorized-transfer allegations survive where a fraudster takes over a device without the consumer's knowing consent, in contrast to scams in which the consumer himself initiates the transfer.
- The ruling is a denial of a motion to dismiss, not a final judgment. It does not decide liability, damages, class certification, or whether the bank breached its EFTA duties.
Why It Matters
The order joins a developing line of district court decisions and departs from a contrary Northern District of California ruling, so the question remains contested among district courts. As an unreported district court order, it is persuasive authority only. It does not bind other judges, and the materials show no appellate ruling on the question.
For banks, the practical point is that the presence of a wire leg does not by itself defeat EFTA claims over electronically initiated debits from consumer accounts. The case also shows the importance of pleading who initiated a transfer, since the first complaint failed on that ambiguity. The bank may still contest the facts on authorization, and the class allegations have not been tested.