CFPB Reverses Course, Withdrawing “Unprecedented” EFTA Interpretation

Following a brief pause under new leadership, the Consumer Financial Protection Bureau (CFPB) has resumed activities, albeit significantly in retreat from the positions taken by the prior administration. In a case involving Citibank and the application of the Electronic Fund Transfer Act (EFTA) and Regulation E to wire transfers, the CFPB has filed a motion to withdraw a previously filed Statement of Interest, which stated, contrary to a plain reading of statutory and regulatory language excluding wire transfers from the scope of EFTA and Regulation E, that wire transfers might indeed fall within scope under certain circumstances.

The case was filed by the New York Attorney General (NY AG) after funds were allegedly stolen from several consumers’ Citibank accounts as a result of fraudulent wire transfers. The NY AG alleged that Citibank violated EFTA and Regulation E by requiring consumers to provide affidavits before investigating the fraudulent wire transfers and for failing to provisionally credit or reimburse consumers for the stolen funds. The core issue in the case was whether wire transfers could be subject to EFTA and Regulation E. Citibank argued that the definition of “electronic funds transfer” under the EFTA expressly excludes wire transfers.[1] The NY AG took the opposite position. The Southern District of New York (SDNY) agreed with the NY AG and ruled against Citibank on a motion to dismiss. The Court recently allowed Citibank to appeal this decision to the Second Circuit.

This decision is at odds with the plain language of the statute and regulations, existing case law, and regulatory guidance that explicitly excludes wire transfers from the definition of electronic funds transfer.[2] For example, in a case decided less than two weeks prior to the Citibank decision that arose from similar underlying facts, the Fifth Circuit affirmed the exclusion of wire transfers from protections under the EFTA and Regulation E.

Moreover, it has long been understood that wire transfers are governed by Article 4A of the Uniform Commercial Code (the UCC), and not the EFTA. As such, the position by the NY AG and subsequent decision by SDNY represents a novel legal theory that is unsupported by case law and historical guidance from the Federal Reserve Board or the CFPB.

Despite that longstanding precedent, the CFPB filed a Statement of Interest under former Director Rohit Chopra that urged the court to deny Citibank’s Motion to Dismiss.[3] It argued, for the first time in its history, that the EFTA does not categorically exempt all wire transfers. Instead, it took the position that wire transfers initiated electronically should be considered electronic funds transfers because part of the transaction involves electronic authorization by the consumer. The CFPB reasoned that there should be a dual application of regulatory frameworks: the UCC should govern the wire transfer component, while the EFTA should govern the remainder of the transaction. It is worth noting that the CFPB’s reasoning here would have been thematically consistent with a position taken by the Board of Governors of the Federal Reserve System with respect to the Federal Reserve Banks’ FedNow Service,[4] which may signal that longstanding regulatory positions with respect to exclusion of wire transfers from the scope of the EFTA could potentially change as payment systems continue to evolve.     

On March 25, 2025, the CFPB filed a Motion to Withdraw its Statement of Interest (Motion).[5] The Motion acknowledges that its interpretation of the EFTA under former Director Chopra was unsupported by case law and its own (and other regulators’) longstanding positions on the coverage and scope of EFTA and Regulation E. The Motion further acknowledged that the interpretation was procedurally problematic because it had not undergone the necessary notice-and-comment process required by the Administrative Procedures Act.

The Motion is another signal of the CFPB’s retreat from former Director Chopra’s leadership, which pushed the boundaries of its authority, including via informal guidance, expected submission to “voluntary” examination, and broad information requests. However, with new leadership in place for nearly three months, the CFPB has already significantly pivoted from Chopra’s more aggressive approach. We expect that trend to continue as the CFPB pares back its activity consistent with the stated goal of reducing its regulatory footprint.

[1] See 15 U.S.C. § 1693a(7)(B) (excluding from the definition of electronic funds transfer “any transfer of funds, other than those processed by automated clearinghouse, made by a financial institution on behalf of a consumer by means of a service that transfers funds held at either Federal Reserve banks or other depository institutions and which is not designed primarily to transfer funds on behalf of a consumer.”)

[2] 12 C.F.R. § 1005.3(c)(3).

[3] Statement of Interest, People of the State of New York v. Citibank, N.A., No. 1:24-cv-00659-JPO (S.D.N.Y. Jan. 30, 2024).

[4] See 87 Fed. Reg. 34,350, 34,351 (acknowledging that although UCC Article 4A applies to all FedNow transfers, there may be instances where a portion of a transfer impacting a consumer account may be subject to the EFTA). 

[5] Motion To Withdraw Consumer Financial Protection Bureau’s Statement of Interest, People of the State of New York v. Citibank, N.A., 1:24-cv-00659-JPO (S.D.N.Y. Jan. 30, 2024).