On April 22, the U.S. SDNY granted a bank’s motion for interlocutory appeal and stay pending appeal to the U.S. Court of Appeals for the Second Circuit in a case involving alleged violations of the EFTA. The case stemmed from allegations by the New York State attorney general that the bank performed fraudulent wire transfers executed by third-party scammers from consumer accounts. The bank previously sought to dismiss the complaint, arguing that a provision of the EFTA precludes liability for fraudulent debits made from a consumer’s account to their financial institution in satisfaction of a wire transfer made on the consumer’s behalf. The court denied the bank’s motion to dismiss as to this cause of action, holding that the provision at issue (15 U.S.C. § 1693a(7)(B)) does not preclude EFTA liability for fraudulent payment orders resulting in a debit from a consumer account in connection with a wire transfer.
The court acknowledged that while it did not believe the bank was likely to succeed on the merits, the issues raised were significant and could impact the banking and financial services industries, and further that the bank’s arguments with “decades of legislative and regulatory history, precise application of interpretive canons, and application of persuasive authority — merit serious consideration.”
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