Henry Meier, Esq., The Law Office of Henry Meier, Esq.

Imagine a member discovers that a fraudster has gained access to the member’s online account and used it to initiate a wire transfer of a substantial amount of money to an account at another financial institution. The member promptly reports the fraud and asks the credit union to return the money. The credit union, however, takes the position that the transaction was a wire transfer governed by Article 4A of the Uniform Commercial Code (UCC), rather than an electronic fund transfer covered by the Electronic Fund Transfer Act (EFTA) and Regulation E. If Article 4A governs, the member has significantly fewer fraud protections and may ultimately bear the loss, provided the financial institution followed the applicable procedures for executing the wire transfer. If the EFTA applies, the credit union has statutory obligations to investigate the member’s claim and comply with the liability limitations and error-resolution requirements under Regulation E.

This is the issue at the center of a developing line of litigation involving fraudulent online wire transfers. The question is not simply how the transfer should be classified. It is who bears responsibility when a consumer is defrauded and money is transferred out of the consumer’s account: the financial institution or the consumer. Two cases, in particular, deserve close attention: New York v. Citibank, N.A. and Chen v. Bank of America, N.A. The central legal issue is whether an electronically initiated online wire transfer should be treated as a consumer electronic fund transfer subject to the EFTA and Regulation E, or as a wire transfer governed by Article 4A of the UCC.

Article 4A was designed primarily to govern commercial funds transfers between financial institutions and businesses. It does not provide consumers with the same protections afforded under the EFTA and Regulation E. In particular, the EFTA generally limits a consumer’s liability for unauthorized electronic fund transfers, establishes procedures for investigating disputed transactions, and imposes requirements on financial institutions when responding to claims of unauthorized activity. Article 4A does not provide an equivalent package of consumer protections.

The distinction can be financially significant. If a transaction is classified as a wire transfer governed by Article 4A, rather than an electronic fund transfer covered by the EFTA, a consumer may have no right to reimbursement if the financial institution complied with Article 4A’s requirements. That is a very different outcome from the protections available under the EFTA and Regulation E, which impose liability limitations and specific obligations for investigating and resolving unauthorized transactions. The issue is particularly important because wire transfers often involve substantially larger sums than the typical debit card transactions covered by the EFTA. As fraudsters increasingly use social engineering, impersonation schemes, and remote access technology to gain control of consumer accounts and initiate large transfers, the question of which legal framework applies can have significant financial consequences for both consumers and financial institutions.

The Citibank Litigation: A Significant Development

The issue came into focus in New York v. Citibank, N.A., 763 F. Supp. 3d 496 (S.D.N.Y. 2025), a case brought by New York Attorney General Letitia James. Historically, it was relatively easy to distinguish a wire transfer from an electronic fund transfer covered by the EFTA. Wire transfers were generally initiated by a customer submitting a payment order in person at a financial institution or over the telephone. Online banking has changed that process. Depending on the financial institution, consumers can now initiate wire transfers electronically through their online accounts. In many instances, however, the money is not transferred directly from the consumer’s account to another financial institution. Instead, the transaction first involves an electronic transfer of funds from the consumer’s account into another account within the same financial institution (an intrabank transfer), before the funds are sent through the interbank wire system.

The Attorney General, and consumers bringing similar lawsuits, argue that this electronic first step is a separate consumer electronic fund transfer protected by the EFTA, even if the subsequent movement of funds between financial institutions is governed by Article 4A. In essence, they argue that a financial institution should not be able to avoid the EFTA’s consumer protections simply because an electronically initiated transaction ultimately results in a wire transfer. The Citibank litigation brought this issue into sharp focus and has since become an important reference point for similar lawsuits.

The Attorney General alleged that Citibank failed to maintain adequate safeguards against fraud, failed to respond appropriately to warning signs, and improperly denied reimbursement to consumers whose accounts had been compromised. The central legal dispute concerned whether Citibank could avoid EFTA obligations by treating the transactions as wire transfers excluded from the statute.

The court rejected Citibank’s argument at the motion-to-dismiss stage. It concluded that the electronic debit from a consumer’s account used to initiate a wire transfer could be covered by the EFTA, even though the subsequent transfer between financial institutions traveled over a wire network. In other words, the court viewed the transaction as having distinct components rather than treating the entire movement of money as one exempt wire transfer.

The distinction is important because Article 4A of the UCC expressly provides that it does not apply to a funds transfer any part of which is governed by the EFTA. Consequently, the classification of the initial electronic transaction can determine which legal framework governs the dispute.

I listened to the Second Circuit’s panel argument in the Citibank case. To put it mildly, the judges appeared skeptical of the Attorney General’s arguments. That is worth noting, particularly because the Second Circuit’s decision could have significant implications for financial institutions operating in New York and elsewhere. But the argument is clearly not going away. The subsequent decision in Chen, along with other federal district court decisions adopting similar reasoning, demonstrates that courts continue to take the theory seriously. Even if the Second Circuit ultimately rejects the Attorney General’s position, the issue is unlikely to disappear. Given the amount of money potentially involved and the significant difference between the protections afforded by Regulation E and the EFTA and those available under Article 4A, credit unions should continue to watch these developments closely.

Chen v. Bank of America: The Issue Gains Further Traction

The issue resurfaced in Chen v. Bank of America, N.A., No. 25-cv-03790-EMC, 2026 LX 609059 (N.D. Cal. Oct. 22, 2026). The decision is particularly important because it adopts much of the reasoning advanced by the New York Attorney General in the Citibank litigation.

The case involved consumers who lost approximately $106,000 after a fraudster gained remote access to a consumer’s iPhone and used that access to initiate transfers from the couple’s Bank of America accounts to an account at Chase. Bank of America argued that because the funds ultimately moved between financial institutions through a wire transfer, the transactions were excluded from the EFTA and instead governed by Article 4A.

The court rejected that argument and denied Bank of America’s motion to dismiss.

The court reasoned that a transaction involving a wire transfer can consist of several distinct components. Although the actual transfer between financial institutions may be excluded from the EFTA, the electronic debit from the consumer’s account and the corresponding credit to the recipient’s account may still qualify as electronic fund transfers protected by the statute.

The court also addressed an important practical issue involving fraud committed through remote access technology. It concluded that a consumer who unknowingly grants a fraudster access to a device has not necessarily authorized the resulting transfers. The fact that the consumer technically granted access to the device does not establish that the consumer gave the fraudster actual authority to initiate the transfers.

This distinction could become increasingly important as fraudsters use impersonation schemes, screen-sharing applications, and remote access technology to take control of consumer accounts.

Other Cases Worth Watching

The decisions in Citibank and Chen are part of a developing body of federal case law. Courts have not reached a uniform conclusion.

Several decisions have followed the reasoning advanced by the New York Attorney General:

• Walling v. Bank of America, N.A., 782 F. Supp. 3d 280 (D.S.C. 2025), adopted the reasoning in Citibank and allowed an EFTA claim involving electronically initiated transfers associated with subsequent wire transfers to proceed.
• Wingard v. TBK Bank, SSB, 768 F. Supp. 3d 1282 (D. Colo. 2025), likewise recognized that intrabank transfers associated with a subsequent wire transfer may fall within the EFTA.
• Nelson v. Wells Fargo Bank, N.A., 2026 WL 2797345, further supported the distinction between the electronic transfer from a consumer’s account and the subsequent interbank wire transfer.

There is also contrary authority. In Jung v. Discover Bank, No. 25-cv-06383 (N.D. Cal. Mar. 9, 2026), the court declined to follow Citibank’s analysis. It questioned whether dividing a transaction into separate components was consistent with the statutory language and concluded that the wire-transfer exclusion should apply more broadly.

The split among these decisions makes the issue particularly important to watch. The Second Circuit’s consideration of the Citibank litigation could provide significant guidance, particularly for financial institutions operating in New York and other jurisdictions where courts have not yet addressed the question.

What This Means for Credit Unions

Credit unions should pay close attention to these developments. At the very least, it is worth discussing the issue with your legal and compliance teams. Credit unions should understand how their online wire transfer processes are structured, including whether the initiation of a wire involves an electronic transfer between accounts within the credit union before the funds are sent to another financial institution.

It is also worth considering how existing fraud prevention procedures and member dispute processes address electronically initiated wire transfers, particularly those involving account takeovers, remote access technology, and other forms of social engineering.

Finally, the decisions could affect how credit unions structure their account agreements, respond to disputed transactions, and evaluate claims involving members who have been victimized by sophisticated fraud schemes.

The Bottom Line

These cases deserve close attention. The fact that the Citibank litigation was brought by New York Attorney General Letitia James is particularly noteworthy. It demonstrates that the argument for applying the EFTA to electronically initiated transactions associated with wire transfers has gained traction beyond private consumer litigation. The subsequent decisions in Chen and other jurisdictions suggest that this is not an isolated legal theory.

Although my impression from listening to the Second Circuit oral argument was that the judges were skeptical of the Attorney General’s position, the subsequent decisions demonstrate that the argument is not going away. There is simply too much at stake. The ultimate question is whether a financial institution can avoid the consumer protections of the EFTA simply because a fraudulently initiated electronic transaction ultimately results in an interbank wire transfer.

At the very least, credit unions should discuss these developments with their attorneys and compliance teams, particularly if they do not currently offer online wire transfers but are considering introducing that capability. Understanding how the transaction is structured before offering the service may help avoid unexpected legal and compliance issues down the road.

If courts adopt the approach advanced by the New York Attorney General, financial institutions could face significantly greater reimbursement and compliance obligations when responding to these types of fraud claims. For credit unions, this is an issue worth monitoring now rather than waiting for the appellate courts to resolve it.

Primary Cases and Additional Reading

1. New York v. Citibank, N.A., 763 F. Supp. 3d 496 (S.D.N.Y. 2025).
2. Chen v. Bank of America, N.A., No. 25-cv-03790-EMC (N.D. Cal. Oct. 22, 2026).
3. Walling v. Bank of America, N.A., 782 F. Supp. 3d 280 (D.S.C. 2025).
4. Wingard v. TBK Bank, SSB, 768 F. Supp. 3d 1282 (D. Colo. 2025).
5. Jung v. Discover Bank, No. 25-cv-06383 (N.D. Cal. Mar. 9, 2026).
6. Nelson v. Wells Fargo Bank, N.A., 2026 WL 2797345.

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