New York Supreme Court Holds That Bank Was Not Liable for Unauthorized Transfers

The Supreme Court of New York, New York County, recently held that a bank was not liable for unauthorized transfers from its customers’ bank account under the Electronic Funds Transfer Act (“EFTA”) because the customers failed to notify the bank of the transfers within 60 days. See Schochet v. Bank of America, N.A., No. 652058-2013 (N.Y. Sup. Ct. Jan. 7, 2016). In the case, approximately $250,000 was transferred out of the plaintiffs’ account over a two-and-a-half year period in a series of 1,156 transfers. The plaintiffs, a husband and wife, admitted that they received all of their monthly bank statements during this period but failed to review them. After they discovered the issue, they notified the bank, who was able to recover and refund about $185,000 to the account. The bank was unable to credit the remainder, and the plaintiffs sued. The parties cross-moved for summary judgment, and the court granted the bank’s motion and denied that of the plaintiffs. It found that the provisions of the EFTA require a bank customer to notify the bank of any issues within sixty days of receiving a statement. 15 USC 1693f. The bank then has ten days to investigate, report back to the customer and credit the account, if necessary. As the plaintiffs were seeking credits mostly for amounts that were transferred well beyond the 60-day window, the bank was not responsible for crediting same under the EFTA. The court further rejected the plaintiffs’ argument that the bank had constructive notice of the fraudulent activity as the plaintiffs were unable to point to any evidence that the bank should have detected it. Finally, the court agreed with the plaintiffs that they had reported some of the fraudulent transfers within the 60-day period and that the bank had failed to credit same within ten days. The court rejected the plaintiffs’ request for $2,000,000 in statutory damages, however, found that the bank had acted in good faith, and fined the bank $100.13.

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