A new type of Electronic Funds Transfer Act (EFTA) class action is now being filed in volume. This trend is highly likely to continue, as the cases are being filed by a  consumer class action firm that has filed hundreds of class actions under the Telephone Consumer Protection Act. Other plaintiffs’ firms likely will follow suit.

The EFTA applies to electronic fund transfers (EFTs) from a consumer’s deposit account, such as electronic debits processed over the ACH network and debit card charges processed over the card networks. When using recurring EFTs to collect payments from consumers’ bank accounts (e.g., to collect monthly utility or other types of regularly scheduled payments), companies must comply with EFTA by, for example, obtaining a written authorization for the EFTs, providing the consumer a copy of the authorization when made and not conditioning any type of extension of credit on repayment by EFT.

Plaintiffs (and regulators) are challenging the complete absence of a written authorization, a legal defect in the authorization or the compulsory nature of the authorization. One issue, for example, is whether audio recordings of oral authorizations are sufficient. The EFTA provides for actual damages, statutory damages between $100 and $1,000, as well as recovery of attorneys’ fees and costs. For class actions, the total statutory damages recoverable are “the lesser of $500,000 or 1 per centum of the net worth of the defendant.”

We have counseled financial institutions and consumer businesses that seek repayment by recurring EFT on complying with EFTA and on taking steps to mitigate the risk of claims by consumers (such as by adding an enforceable arbitration provision to the relevant agreement). We also have extensive experience defending consumer class actions under EFTA and other consumer statutes throughout the country.

On October 7, 2015, Ballard Spahr attorneys will hold a webinar, providing deeper insight into this new EFTA class action, from 12:00-12:30 p.m. ET. More information and the registration form are available here.

If you have any questions on compliance with EFTA or defending claims brought under EFTA, please contact Scott M. Pearson, Mark J. Furletti, Consumer Financial Services Practice Leader Alan S. Kaplinsky, John L. Culhane, Jr., or the Ballard Spahr attorney with whom you work.


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