Federal Courts Split on Whether the Electronic Funds Transfer Act Applies to Consumer Wire Transfers

A recent decision from the United States District Court for the Northern District of California highlights a developing judicial split over whether the Electronic Funds Transfer Act (EFTA) applies to consumer wire transfers. In Jung v. Discover Bank, the Court dismissed an EFTA claim arising from a social-engineering scam that induced a $110,000 wire transfer, holding that consumer wire transfers fall outside the statute’s scope. The ruling contrasts with a recent decision from the United States District Court for the Southern District of New York, New York v. Citibank, N.A., which held that certain consumer wire transfers may fall within the EFTA.

Background

In Jung, a fraudster posing as a bank representative convinced the plaintiff’s spouse to complete identity-verification steps that ultimately enabled the initiation of a $110,000 wire transfer from the couple’s account. After the bank declined reimbursement, the plaintiff filed a putative class action asserting claims under the EFTA, California’s Uniform Commercial Code (UCC) and California’s Unfair Competition Law. The Court dismissed the EFTA claim with prejudice.

The California Court’s Holding

The Jung Court held that the EFTA does not apply to consumer wire transfers. The statute excludes from the definition of “electronic fund transfers” transactions conducted through systems used to transfer funds between financial institutions, and Regulation E similarly excludes “wire or other similar transfers.”

Relying on this statutory language and prior appellate authority, the Court concluded that consumer wire transfers fall outside the EFTA framework. The Court also declined to follow a recent out-of-circuit decision that had interpreted the statute more broadly.

The New York Court’s Different Approach

In New York v. Citibank, the Southern District of New York reached a different conclusion when evaluating scam-induced consumer wire transfers.

The Court reasoned that a wire transfer can be understood as a sequence of steps rather than a single transaction. Although the interbank transmission portion of the transfer may be excluded from the EFTA, the Court concluded that the initial debit from a consumer account, particularly when initiated electronically through online banking, may qualify as an electronic fund transfer. On that basis, the Court allowed the EFTA claims to proceed past the pleading stage.

Emerging Judicial Divide

Taken together, these decisions illustrate a growing divide in how courts interpret the EFTA in the context of consumer wire fraud. The Jung decision reflects the traditional view that consumer wire transfers are categorically excluded from the statute and instead governed by Article 4A of the UCC, which allocates losses based largely on the commercial reasonableness of a bank’s security procedures.

By contrast, the Citibank decision treats the consumer-account debit and the interbank wire transmission as analytically distinct steps. Under that approach, the initial debit from the consumer’s account may fall within the EFTA even though the subsequent interbank transfer does not.

Why the Issue Matters

The scope of the EFTA has significant implications for financial institutions and fintech providers. If courts adopt the broader interpretation reflected in Citibank, banks could face expanded liability for scam-induced consumer wire transfers and may be subject to Regulation E investigation and reimbursement obligations. If courts continue to follow the approach taken in Jung, disputes over fraudulent wire transfers will generally remain governed by the UCC’s Article 4A framework. 

Notably, while the Biden-era Consumer Financial Protection Bureau (the “Bureau”) filed a Statement of Interest in Citibank endorsing the broader view of the EFTA eventually adopted by the Southern District of New York, the Bureau rescinded that statement in early 2025, calling it “an unsuitable method of advancing a novel and significant interpretation of the EFTA that could impose significant liability on regulated parties without fair notice.” This indicates that the current leadership of the Bureau (which has rulemaking authority over the EFTA under the Dodd-Frank Act) agrees with the narrower view set forth in Jung. 

Outlook

Most courts to address the issue have aligned with the interpretation reflected in Jung, but the reasoning adopted in Citibank signals the potential for further litigation over the statute’s scope. As fraud schemes increasingly rely on sophisticated social-engineering tactics, courts and regulators may face growing pressure to clarify whether—and to what extent—the EFTA applies to consumer wire transfers.