Consumer Banking and Payments Law: 5.15.9 DELETED—Breach of Contract or Duty of Care; Bad Faith
[Editor’s Note: This section has been deleted.]
[Editor’s Note: This section has been deleted.]
[Editor’s Note: This section has been deleted.]
[Editor’s Note: This section has been moved to § 5.15.12, infra.]
[Editor’s Note: This section has been moved to § 5.15.12, infra.]
Today, most services that rely on data aggregators do so with at least the nominal consent of consumers. But consumers may not always understand the extent of access that they are purportedly authorizing. Moreover, it is possible that, in some circumstances, companies will use data aggregators without consumer consent.
In recent years, a number of crypto assets (sometimes called “cryptocurrencies,” “virtual currencies,” or “digital assets”) have been created, such as Bitcoin, Ether, Tether, Litecoin, Peercoin, Freicoin, and XRP. Crypto assets purport to be a form of private money that is not issued by a central bank or government. But in reality, these assets are primarily used for speculation and/or illicit finance.
The Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and U.S. Treasury Department have all addressed aspects of crypto assets that are beyond the scope of this treatise.
Any person (not only a financial institution) who fails to comply with any EFTA provision with respect to any consumer is liable under 15 U.S.C. § 1693m for the sum of:
Section 5.6.1, supra, discusses the EFTA’s general remedies and application to any violation. The EFTA also provides special remedies for several specific violations. The first of these is a special remedy for certain violations involving the failure to follow a consumer’s money transfer instructions. A financial institution is liable to a consumer under 15 U.S.C.
A second special EFTA remedy provision makes a financial institution liable for treble damages under 15 U.S.C.
Section 1693m contains four statutory defenses to EFTA liability.
The second EFTA statutory defense to liability provides that a defendant is not liable for any act done or omitted in good faith that conforms to any rule, regulation or interpretation by the CFPB or in conformity with any interpretation or approval by an official or employee duly authorized to issue interpretations or approvals under prescribed procedures, notwithstanding that the rule, regulation or approval is later invalidated.1536 Several other
The third statutory defense to EFTA liability provides that there is no liability if the person uses the appropriate model clause issued by the CFPB.1550 The Dodd-Frank Act also authorizes the CFPB to create model disclosures and contains a similar safe harbor from liability for use of the model forms.1551
The fourth statutory defense to EFTA liability provides that a person is not liable if, before the consumer filed the lawsuit, the person notified the consumer, complied with the requirements of the EFTA, made an appropriate adjustment to the consumer’s account, and paid actual damages.1555
In addition to the defenses in the EFTA, the Dodd-Frank Act provides a safe harbor related to trial disclosure programs.
The EFTA casts liability on “any person” who violates one of its provisions. Some of the EFTA’s substantive requirements and prohibitions apply only to financial institutions, but certain entities that do not hold consumer accounts but provide electronic fund transfer services are nevertheless subject to the EFTA in almost the same manner.1559 Some Regulation E provisions apply to any “person,” not merely financial institutions.1560
This chapter discusses issues primarily related to the bank-customer relationship and bank accounts.1 The Truth in Savings Act currently applies only to bank accounts, but some of the other topics discussed in this chapter may apply to non-bank financial service providers that hold consumer funds in deposit accounts or very similar types of accounts, like prepaid card accounts or mobile wallets.
Consumers with blemished credit reports may have difficulty opening a bank account. Banks, like other financial service providers, conduct checks with consumer reporting agencies before permitting consumers to open an account. They typically use specialized consumer reporting agencies, like ChexSystems, that focus on the consumer’s history with bank accounts.
State bank supervisors have posted an online interactive map outlining the requirements in each state for opening a bank account for a minor.13 The purpose of this resource is to assist financial institutions in determining whether, and to what extent, they are allowed to provide bank accounts to minors.
When a customer opens a deposit account at a depository institution, the relationship between the bank and the customer is governed by the contract between the customer and the institution and by applicable statutes and regulations. The essence of the bank-customer relationship is that the bank owes the customer the money and is therefore a debtor of the customer.15
Banks have a duty to act in good faith and use ordinary care in their dealings with their customers, arising both under common law and under the Uniform Commercial Code (UCC).18 The UCC does not create a separate duty of fairness and reasonableness that can be independently breached, but the duty to act in good faith and use ordinary care does color the interpretation of—and duties under—the UCC.19 A specific, applicable provision of the UCC may trump a more generalized common law duty.
Prior to the amendment of Regulation D in 2020, the Federal Reserve Act imposed different requirements on checking accounts than on savings accounts, and those rules impacted how consumers could access funds in a savings account.
The Truth in Savings Act (TISA) was passed in 1991 for the purpose of requiring clear and uniform disclosures of interest rates and fees in connection with deposit accounts so that consumers could make meaningful comparisons.28 The TISA also requires disclosure of a number of other aspects of savings and demand deposit accounts, and regulates the calculation of interest payable.
The TISA disclosures must be provided before an account is opened or a service for which a fee is charged is provided, whichever is earlier.35