CFPB Files Amicus Brief in Support of EFTA-related Class Action Lawsuit

In an amicus curae brief filed in the U.S. Court of Appeals for the Fourth Circuit, the CFPB supported plaintiffs in their appeal of a dismissal of a class action against a major commercial bank for allegedly mismanaging the distribution of government benefit prepaid cards during the COVID-19 pandemic.

The CFPB's interest in the case stems from its authority to promulgate rules under and enforce the Electronic Fund Transfer Act ("EFTA"), "a framework of rights and responsibilities for financial institutions, consumers, and intermediaries who transfer funds electronically." Plaintiffs argued that prepaid accounts, such as government benefit accounts, are considered covered accounts under the EFTA. The plaintiffs had alleged that the bank failed to investigate an error in unemployment benefits accounts, even after submission of their complaint to the bank, which, they argued, constitutes a violation of the EFTA and Regulation E ("Electronic Fund Transfers").

A federal judge in the U.S. District Court for the District of Maryland dismissed the suit, ruling that the EFTA does not apply to prepaid cards that contain only funds provided for "qualified disaster relief payments[,]" an exclusion available under Regulation E. In its brief, the CFPB argued that the District Court misapplied the exclusion for prepaid cards used for qualified disaster relief payments, asserting that the exclusion does not apply to government benefit accounts. The CFPB said that plaintiff's account should have been entitled to applicable statutory and regulatory protections and that the District Court's decision should be reversed.