Electronic Funds Transfer Act Violations

November 28, 2012

Young Americans are increasingly relying on technology to monitor, transfer, and conduct payments. Nearly all banks now have apps for download on smart phones to seemingly assist in the growing ease of banking. As our society becomes more and more dependent on technology, however, we are also growing more financially illiterate and susceptible to illegal activity. The perils of credit card debt are no secret in our consumer-driven economy, although the realities of the measures debt collectors are willing to take are often unspoken. The FDIC established the Electronic Fund Transfer Act to provide a basic framework for the rights, liabilities, and responsibilities of those participating in electronic fund systems.

1176251_cut_expenses_1.jpg The Act and the Federal Reserve Regulation provide a Consumer Bill of Rights for electronic fund transfers. These rights pertain to both consumers and card issuers. Recently, reports have surfaced of debt collectors obtaining payments through consistent account withdrawals without consent of the account holder. Consumer rights lawyers at Pintas & Mullins inform the public that payment arrangements of this sort are a direct violation of the Electronic Funds Transfer Act.

Creditors may offer lower interest rates if you voluntarily agree to pay bills electronically. This is commonplace for cable companies or utility providers. If you agree to pay your debt via electronic funds, it is legally required for you to submit a signature either electronically or on paper warranting the payment. Regardless of the age or amount of your debt, the decision to authorize payments must be yours alone. A copy of your written consent must be given to you by the party obtaining it (i.e. the debt collectors). Either the financial institution or the debt collectors must notify you of the amount of the transfer and scheduled date at least ten days in advance of said date.

It is unlawful for a financial institution to refuse your request to cease payment, even if you have entered into an agreement with the debt collectors for electronic payments. If you notice any unauthorized withdrawals or payments from your account, it is important to follow the error resolution process carefully. The EFT Act requires that you notify your financial institution (U.S. Bank, Harris Bank, etc) within 60 days after it mailed the statement. In your notification you must provide the following information: your name, the number of the affected account, the reason you believe it is an error or unauthorized transfer, the type of transaction you believe it to be related to, the exact amount, and the date of the unauthorized transfer.

It is best to provide this information through writing, rather than over the phone or in person. It is required that the institution investigates the matter and determine within 10 days if an unlawful transaction occurred. If the investigation takes more than 10 days, the exact amount must be provisionally credited to your account and give you full access to those funds.

After completion of the investigation, the financial institution has three days to notify you of the conclusions. Under the Fair Debtors Collection Practices Act, you have the right to sue a debt collector in state or federal court within one year of the violation. For more information regarding what debt collectors are not lawfully able to do, follow this link.

Debt collection attorneys at Pintas & Mullins urge those being harassed or illegally charged by collectors to contact our office immediately for a free legal consultation.