The Court of Appeals for the Sixth Circuit has upheld the dismissal of an Electronic Funds Transfer Act case filed by a credit union against T-Mobile, in which the credit union sought to be reimbursed for funds lost by its customers in a cellphone scheme that was perpetrated against the telecom company.
The Background: The case stemmed from a scam known as “SIM Swap,” where scammers impersonated the defendant’s customers to gain access to their personal information and make unauthorized financial transactions. This scam led several customers to report unauthorized electronic fund transfers to their financial institutions, including the plaintiff, which is required under the EFTA to reimburse customers for such unauthorized transfers.
The plaintiff subsequently sought to recover these reimbursed funds from the defendant, arguing that the wireless provider failed to adequately protect its subscribers from SIM Swap scams. The credit union filed a putative class action, asserting claims for indemnification and contribution under the EFTA, Michigan’s Electronic Funds Transfer Act (MEFTA), and common law.
The Ruling: On appeal, the Sixth Circuit upheld the district court’s ruling, agreeing that the EFTA does not imply a right to indemnification or contribution. The court noted that the EFTA was enacted to protect consumer rights, not to benefit financial institutions. It emphasized that the EFTA contains a comprehensive framework that does not support the addition of new remedies for financial institutions.
Additionally, the court found that the EFTA preempts the MEFTA and any state common-law claims for indemnification or contribution. The Consumer Financial Protection Bureau (CFPB) had previously determined that state laws imposing liability on consumers for unauthorized transactions were inconsistent with the EFTA, further supporting the court’s conclusion that federal law preempts state law in this context.
