Compliance Blog

Apr 29, 2022

Litigation Roundup

Litigation risks are always present and there is no shortage of litigious plaintiffs. You may have seen our team’s earlier update on an interesting Telephone Consumer Protection Act (TCPA) case. I promise that litigation issues are not the only thing happening right now, but I wanted to raise a few other notable class action filings in the recent months.

Automated Clearinghouse (ACH) Transfer Fees

A plaintiff filed a class action lawsuit in the Western District of North Carolina against Bank of America for charging deceptive ACH transfer fees. A class action was filed by the same plaintiff last year in New York but this time alleging violations of North Carolina laws, which NAFCU previously blogged about here. Again, the plaintiff alleges that Bank of America charges $3 or $10 dollars in ACH transfer fees, depending on the delivery speed and type of account despite that “any transfer over the NACHA system can always be made for free,” and therefore is deceptive.

The plaintiff alleges that Bank of America’s practices regarding ACH transfer fees constitute an unfair and deceptive trade practice under North Carolina’s consumer protection laws and that this practice unjustly enriched the bank. NAFCU will continue to monitor both class action suits.  

Electronic Funds Transfer Act (EFTA)

With the rise in person-to-person (P2P) and mobile payment transactions it is no surprise that there has also been a rise in related fraud. A class action lawsuit was filed in the Central District of California against Wells Fargo for violations of the ETFA stemming from fraudulent Zelle transactions. As a person who routinely uses Zelle to transfer money, I am especially concerned about the scammers out there trying to gain access to accounts through Zelle.

The facts of this case are unfortunate, as everyone is susceptible to fraud. A scammer contacted the plaintiff claiming to be a Wells Fargo employee, using a telephone number that showed up as coming from the bank on the plaintiff’s caller ID, to alert the plaintiff that several fraudulent transactions had occurred and instructed the plaintiff to login to their online account. Although the plaintiff did not see any suspicious transactions in their online account, the scammer told the plaintiff that they had removed the fraudulent transactions and to recover the funds quickly a Zelle transfer would need to take place. The scammer instructed the plaintiff to send a Zelle verification code, which enabled the scammer to steal $1,000 from plaintiff’s account. Once the plaintiff realized what happened, they contacted Wells Fargo who issued a provisional credit for the disputed amount. After Wells Fargo completed their investigation, they ultimately reversed the provisional credit because the disputed transaction was “made by [Plaintiff] or someone who had [Plaintiff’s] permission to perform transaction on [her] account.”

The plaintiff is alleging that Wells Fargo violated the EFTA and California’s Unfair Competition Law. The EFTA and Regulation E apply to electronic fund transfers. Under Regulation E, financial institutions are required to conduct investigations into alleged errors, which include any unauthorized electronic fund transfer, as set forth in section 1005.11. The plaintiff cites the CFPB’s recent Regulation E FAQs, highlighting that the bureau  has indicated that fraudulently inducing a consumer into sharing account access information used to initiate an electronic fund transfer from a consumer’s account is deemed an unauthorized electronic fund transfer.

Section 1005.6(b) limits a consumer’s liability for unauthorized electronic funds transfers if the consumer provides timely notice to the financial institution. The plaintiff alleges that they provided notice of the error to Wells Fargo within 60 days, and that Wells Fargo incorrectly concluded that the fraudulent Zelle transfers were not errors. Therefore, the plaintiff was unable to recoup the funds that were fraudulently taken from the account.

Last year, a class action lawsuit was filed against TD Bank for violations of the ETFA where similar fraudulent transactions had occurred through Zelle. NAFCU will continue to monitor these ETFA cases and encourages everyone to remain vigilant against scammers when using mobile payment applications.

Americans with Disabilities Act (ADA)

Financial institutions are no stranger to Title III claims under the ADA. In April, a plaintiff filed class action lawsuits in New York against three individual financial institutions: Synchrony Financial, Raymond James; and First Horizon Bank. Looking at the Synchrony Financial lawsuit, the plaintiff alleges that Synchrony Financial failed to design, construct, maintain, and operate a website that was accessible to the plaintiff, a visually impaired and legally blind individual. The plaintiff alleges numerous accessibility issues in trying to access the financial institution’s website including: a lack of alternative text; empty links that do not contain text; redundant links; linked images missing alternative text; and pages missing titles.

Section 12182 of the ADA generally prohibits discrimination on the basis of a disability “in the full and equal enjoyment of goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation.” There continues to be a split of authority regarding whether a website constitutes a place of public accommodation. Recently, the Department of Justice (DOJ) reiterated their stance that the ADA applies to website of places of public accommodation and provided guidance on ADA website compliance. These class action suits evidence the continued trend of Title III cases against financial institution’s websites. As a reminder, the DOJ also noted that ADA compliance is an enforcement priority, so credit unions should familiarize themselves with the DOJ’s recent guidance and take a closer look at their websites. See our NAFCU blog for more information on DOJ’s guidance.

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