The bank defended by arguing that the Act did not apply. Is the transaction governed by the EFTA? Explain.

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The bank defended by arguing that the Act did not apply. Is the transaction governed by the EFTA? Explain.

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Morvarid Kashanchi and her sister, Firoyeh Paydar, held a savings account with Texas Commerce Medical Bank. An unauthorized withdrawal of $4,900 from the account was allegedly made by means of a telephone conversation between some other unidentified individual and a bank employee. Paydar learned of the transfer of funds when she received her bank statement and notified the bank that the withdrawal was unauthorized. The bank, however, declined to recredit the account for the $4,900 transfer. Kashanchi brought an action against the bank, claiming that the bank had violated the Electronic Fund Transfer Act (EFTA). The bank defended by arguing that the Act did not apply. Is the transaction governed by the EFTA? Explain.

Explanation & AnswerSolution by a verified expert

Explanation

EFTA protects the customers from unauthorized transfers made through electronic medium. EFTA does not cover a transaction made by a conversation between the bank and the customer. In this case, the unauthorized transaction claimed by Customer K falls under this exception, which is why not governed by EFTA.
 
The fraud transaction done on Person K's account is because of the bank's negligence where the bank has not tried to identify the customer over telephone and has made a payment without proper scrutiny. So, Person K can claim remedy for negligence or breach of contract.

Verified Answer

No, in this case, the act is not governed by Economic Funds Transfer Act (EFTA). This a conversation over telephone between a customer and a bank officer regarding a transaction, which is not regular and prearranged, is not covered under EFTA.
 
Person K may sue the bank for negligence or breach of contract since bank has not tried to identify the customer's authenticity.

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