Did First National Bank Violate the Electronic Fund Transfer Act?  

The Electronic Funds Transfer Act regulates the use of electronic transfers of funds by consumers and provides a way for consumers to report errors by financial institutions. One such error is the improper application of ATM fees or the application of these fees without proper consumer notification. Currently, several financial institutions are facing allegations of violating the Electronic Fund Transfer Act, including First National Bank.

If you are a customer of First National Bank and believe you were improperly charged an ATM fee, you may be able to file a class action lawsuit to seek compensation.

Why Is First National Bank Charging ATM Fees?

Part of the way banks and financial institutions make money is by charging fees, including ATM fees. ATM fees are usually applied when an account holder uses an ATM operated by another financial institution. These fees may be applied for any type of transaction, not just withdrawals. The best way to avoid ATM fees is simply to use an ATM within your bank’s system.

There are actually two separate ATM fees that a consumer may be assessed when using an out-of-system ATM: One fee charged by the machine operator and another by the consumer’s own banking institution.

With fewer and fewer Americans using cash, the cost of using an out-of-network ATM for withdrawal has hit a record high of nearly $5, having risen by a third in just the last decade, per a Bankrate survey cited by USA Today. These fees vary depending on location, with the highest average fees in Houston at $5.58. A large portion of the reason for the increase is that the ATM operator’s surcharge for non-customers has increased by 6.5% in just the last three years.

What Is the Electronic Fund Transfer Act (EFTA)?

According to the National Credit Union Administration (NCUA), the Electronic Fund Transfer Act (EFTA) was passed in 1978 to protect consumers using electronic fund transfers (EFTs) including point-of-sale terminals (POS), automated clearinghouse systems, transfers through ATMs, remote banking programs, remittance transfers, and bill payment plans that involve periodic or recurring transfers. These transfers generally require consumers to use a card or pin number to initiate the action. The EFTA is also known as Regulation E, and is implemented by the Federal Reserve Board.

What Does the Electronic Fund Transfer Act Do?

The purpose of the EFTA is to provide federal requirements for when transaction errors occur during these kinds of fund transfers. The EFTA imposes requirements for banks and credit unions, as well as for the consumers themselves.

Essentially, the EFTA was created so that consumers could challenge errors by banking institutions. The EFTA lays out guidelines for both the institution and the consumer and “requires banks to provide certain information to consumers and defines how consumers can limit liability in the case of a lost or stolen card, according to Debt.org.

The law addresses a variety of electronic services and states that:

• If a consumer makes an ATM withdrawal or deposit that incurs a fee, that fee must be disclosed at the time of the transfer. The EFTA blocks financial institutions from charging overdraft fees on ATM transactions unless the account holder has consented to overdraft protection.
• Preauthorization for direct deposits, including payroll checks or recurring bill payments, should be retractable by the account holder at “any given time.” Requests to stop future payments must be submitted at least three days before the next scheduled transfer.
• Account-holders may make deposits and transfers by phone while requiring the bank to verify the person’s identity using account-specific information. Similar banking services may be accessed through a bank’s web portal.
• Businesses can convert checks into cash using electronic-check conversion. After the check has been converted, it becomes null and void.
• Consumers can use debit cards to make purchases. The EFTA doesn’t cover gift cards, credit cards, or prepaid phone cards.

The EFTA’s information requirements require banks to provide consumers with the following:

• An overview of liability for unauthorized transactions and transfers
• Contact information in case of an unauthorized transaction, as well as a reporting process
• Types of transfers and the associated fees or limitations
• The account holder’s rights, including the right to periodic account statements and POS receipts
• The bank’s liability if it fails to make or stop transactions
• An explanation of when account information may be shared with a third-party
• Information regarding how to make an error report and a timeline of when to do so
• Notice of ATM fees at non-system ATMs

One of the most important protections included in the EFTA is that it provides a path to correcting transaction errors that may occur. Under the EFTA, consumers can challenge transaction errors and have them corrected within 45 days, while incurring limited financial penalties.

Did First National Bank Violate EFTA?

A banking institution that charges ATM fees without notifying the consumer at the time of the transaction is in violation of the EFTA. First National Bank is currently facing such allegations. If you believe you were improperly charged an ATM fee by First National Bank, you may be able to file a class action lawsuit against the institution. Allegations of EFTA violations by First National Bank haven’t been proven or disproven.

How Are EFTA Violations Regulated?

The EFTA regulates the services of banks, cell providers, credit unions, utility companies, debt collectors, credit card companies, payday lenders, and companies that handle automatic monthly payments. Violations are first reported by the consumer to the institution they believe committed the error within 60 days of the alleged violation.

If the institution finds that an error was made, the institution must correct it, usually by returning the amount of the fee or unauthorized transfer. If not, the consumer must be provided an explanation in writing. However, if you reported an error to your bank or credit union and were denied reimbursement, you may be able to take legal action against the institution.

Can You Take Legal Action?

If your financial institution violated the EFTA, you may be able to file a class action lawsuit against it. Indeed, a growing number of consumers are turning to class action litigation against financial institutions that they allege charged illegal bank fees with the use of an ATM. Settlements on such claims can settle in the millions.

In 2018, plaintiffs filed a class action against Capital One NA alleging that it charged “unfair and unconscionable” ATM fees. The suit alleges that Capital One charged fees without notifying consumers of the total amount or number of fees charged.

If courts find that the bank violated the EFTA, plaintiffs may be entitled to reimbursement for fees as well as punitive damages of between $100 and $1,000. Court fees and attorney’s fees are often included in compensation awarded to successful plaintiffs.

Filing a lawsuit can be a daunting prospect, so Top Class Actions has laid the groundwork for you by connecting you with an experienced attorney. Consulting an attorney can help you determine if you have a claim, navigate the complexities of litigation, and maximize your potential compensation.