Bank Of America And Zelle Establish Compliance With The EFTA

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In a comprehensive decision, the United States District Court for the Central District of California recently dismissed a class action complaint brought against Bank of America (the "Bank")...
United States Compliance
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In a comprehensive decision, the United States District Court for the Central District of California recently dismissed a class action complaint brought against Bank of America (the "Bank") for violations of the Electronic Funds Transfer Act ("EFTA") and the California Unfair Competition Law ("UCL") relating to allegations that the Bank failed to properly investigate its customers' claims on Zelle transactions. Tristan v. Bank of Am., No. 8:22-CV-01183-DOC-ADS, 2024 U.S. Dist. LEXIS 36463 (C.D. Cal. Feb. 29, 2024).


Three bank customers sued the Bank for the failure to refund allegedly unauthorized transfers of funds from their respective bank accounts via Zelle. Zelle is an electronic, peer-to-peer fund transfer that is quicker than other methods of wiring money from one person to another. Zelle is owned by Early Warning Services, a company that works with financial institutions to give customers access to Zelle.

The Bank investigated each claim and denied the reimbursement based on the results of those investigations. Plaintiff Tristan then filed suit against the Bank, alleging violations of the EFTA, breach of contract, unjust enrichment, and negligence, among other claims. The other two individuals who had funds stolen also filed complaints alleging similar claims. These three individuals then brought a Consolidated Amended Class Action Complaint against the Bank and Early Warning Services.

The Bank filed a motion to dismiss all claims, which the Court granted, except for the "breach of the contracts' express terms, [and] breach of the implied covenant of good faith and fair dealing." Plaintiffs then filed their Second Amended Complaint, prompting a second motion to dismiss, which the Court granted in part and denied in part. Plaintiffs then filed a Third Amended Complaint, which prompted the Bank to file a motion to dismiss again. Three claims remained: Breach of Contract and Breach of the Covenant of Good Faith and Fair Dealing, violations of the EFTA, and violations of the UCL.

The Decision

Electronic Funds Transfer Act

Under Section 1693(f) of the EFTA, financial institutions must investigate any error reported by a consumer within ten business days of being notified. A bank can also recredit the account pending the conclusion of the investigation, which shall take no longer than 45 days after receipt of notification. "Errors" include unauthorized electronic transfers.

Additionally, Regulation E, which implements EFTA, allows a financial institution to review its own records regarding an alleged error if "(i) [t]he alleged error concerns a transfer to or from a third party; and (ii) [t]here is no agreement between the institution and the third party for the type of electronic fund transfer involved." 12 C.F.R. § 205.11(c). Here, the Bank maintained that it complied with the EFTA and related regulations. The Court previously granted the Bank's motion to dismiss this claim, asking the Plaintiffs to specify what investigative steps the Bank could have undertaken but did not. The Bank again moved to dismiss the EFTA claim, stating that the Plaintiffs alleged no new facts supporting a plausible inference that it failed to investigate the claims of error.

In its decision, the Court found that the record was clear that the Bank did review "previous valid account activity" before denying the Plaintiffs' request to be re-credited. For example, the Bank's denial of reimbursement was supported in the case of Ahuja by the transaction in question being validated through an authentication code sent to his phone number and confirmed by either text or a conversation with the bank's fraud detection department. As to Myers, the Bank reviewed the account history and "any other relevant information" including all available information on the "Beneficiary of the disputed amount." In so finding, the Court made clear that just because the Bank reached a different conclusion than the Plaintiffs does not mean that the Bank failed to comply with the EFTA.

California's Unfair Competition Law

The Plaintiffs also seeking injunctive relief for violations of California's UCL. Specifically, the Plaintiffs were alleging future harm for unfair and deceptive practices in marketing the Zelle service. "To establish standing for injunctive relief, '[t]he plaintiff must demonstrate that he has suffered or is threatened with a concrete and particularized legal harm, coupled with a sufficient likelihood that he will again be wronged in a similar way.''' Bates v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007). The Court previously reasoned that the Plaintiffs "did not plausibly allege that they faced the threat of repeated injury as Defendant had stopped making those allegedly misleading statements.''

In this go-around, the Plaintiffs sought "corrective business practices concerning [the Bank's] policies and procedures pertaining to Zelle transactions including: i) provisional credits to customer accounts during the investigation period, ii) investigation of unauthorized money transfers, and iii) reimbursements to consumers for unauthorized Zelle transactions, to benefit the California public who use Zelle and/or who may use Zelle in the future." However, this argument failed for the same rationale the Court espoused earlier: there was no threat of imminent harm or injury that the Bank could prevent or would be responsible for. In that vein, the harm Plaintiffs alleged that they sought to prevent was that: (1) they would be scammed again and Plaintiffs would again, contrary to the Bank's advice, send a Zelle payment to the fraudster as Tristan did, or (2) they would have a third-party criminal take possession of their cell phone as in the case of Ahuja.

Finally, the Court denied the Plaintiffs' request for leave to amend, saying that although courts should freely grant leave when justice requires it, they do not have to allow endless bites at the apple. The Plaintiffs have had numerous chances to file an adequate complaint and have failed to do so for the final time.


This case offers two main takeaways for readers. First, while financial institutions must investigate any error in a customer's account within the required time frame set forth in the EFTA, if they do so and document their efforts, they have complied with the statute and should not face liability. Second, this decision emphasizes that to obtain injunctive relief, Plaintiffs must show concrete, particularized legal harm and a real and immediate threat of being harmed again, not just speculative or theoretical harm.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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