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Knowing Your Rights: Online Bank Fraud

Over the past decade, the financial technology industry – or “FinTech” – has exploded as companies continue to innovate and employ technology intended to make financial transactions easier.  Progress has been made and convenience has increased; never before have consumers had the ability to move money with such ease, whether through Venmo, PayPal, Zelle, or other online bank-to-bank transfers. 

But along with this convenience, a grave problem has emerged from the proliferation of online payment systems:  a huge spike in unchecked banking fraud.  Indeed, the convenience enjoyed by consumers has benefitted fraudsters too, who can now carry out fraud remotely from anywhere in the world.  This is the first in a three-part series published by Kelly Guzzo outlining the primary fraud mechanisms used in the FinTech age – electronic fund transfers and wire transfers – and the legal rights consumers have when they fall victim to online bank fraud. 

Part 1:  What to Do if You Are a Victim? 

While many consumers know how to avoid fraudulent schemes – for example, by not answering phone calls or text messages from an unknown number – fraudsters sometimes still find a way.  When that happens, the fraudster is typically long gone before the consumer even notices their money is missing.  The question then becomes:  Who is responsible – the consumer or the bank?  As with many legal questions, it is best answered with “it depends.”

That uncertainty makes it extremely important for consumers to know their rights when banks blame them for third-party fraud, as is so often the case.  The New York Times, for example, recently reported that banks claim returning money to defrauded Zelle consumers is not their responsibility, despite owning the system.  And Fox 5 DC recently profiled a Kelly Guzzo client who sued Truist Bank after it denied responsibility when her small business bank account was wiped out by hackers.  

There are steps you can and should take if you are victimized by online bank fraud.  First, immediately report the unauthorized transfer to your bank – first verbally and then in writing – and request that the stolen funds be reimbursed on the basis that the transfer was unauthorized.  Make sure all written correspondence identifies you, your account, and the transfer at issue, and always keep a copy for your records.  Next, report the fraud to law enforcement and the Federal Trade Commission.  Finally, ensure that your identity has not been compromised in any other ways.  For example, confirm that all your other bank accounts were untouched, and pull your credit reports and check for unauthorized activity. 

If, following your request for reimbursement, your bank denies relief and continues to hold you responsible for an unauthorized transfer, you may have options to sue for relief under federal or state law.  The scope of your rights depends on the type of transaction involved, how quickly you notified your bank, and other factors rooted in applicable law. 

Kelly Guzzo is committed to assisting victims of online bank fraud.  If you find yourself in this situation, please do not hesitate to contact our office for a free consultation.

Wed Jul 20, 11:18am

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