Unauthorized Withdrawal from Your Bank Account

The Electronic Fund Transfer Act (EFTA) governs the use of electronic funds transfers (EFTs).  The consumer protections apply to accounts that are for a personal use, not business accounts.  This  federal law limits a consumer’s liability for unauthorized EFTs, provided the consumer follows certain rules.  These rules require a consumer to notify his or her financial institution within certain time frames when a consumer’s access device has been lost, stolen, or otherwise used without permission (unauthorized).

Unauthorized Transfer:  Any transfer from a consumer’s account that occurs without the consumer’s permission, and from which the consumer receives no benefit, is considered unauthorized

Access Device:  Examples include a card, access code (like a PIN), or any other device that provides access to a consumer’s account.  The most common is a debt card.

Bank Business Day:  Every day except Saturday, Sunday or a federal banking holiday. Even if the institution is open on weekends, these days are NOT considered business days.

Consumer’s Maximum Liability for Unauthorized Transfers

There are 4 basic tiers of consumer liability under federal law.  Which liability tier applies depends upon the timing of the consumer’s notice to the financial institution.

Four Tiers of Consumer's $ Liability
Tier 1: $0 Applies to EFTs made without an access device (ACH debit) and consumer notifies institution within 60 days of receiving a statement that shows the unauthorized transaction.
Tier 2: < $50 Within 2 business days after discovering the theft or loss of an access device(or it unauthorized use), customer notified the financial institution.  Consumer’s liability is the lesser of $50 or the actual amount of the unauthorized activity that occurs before the financial institution was notified.
Tier 3: < $500 More than 2 business days after discovering the theft or loss of an access device(or it unauthorized use) customer notified the financial  institution.  Consumer’s liability is the lesser of $500 OR up to $50 within 2 business days rule+ actual amount of unauthorized use occurring after   the 2 business days and before notice to the financial institution.
Tier 4: $ Unlimited More than 60 days after account statement listing error was mailed, consumer notified financial institution.
Error Resolution Time Frames  
  • General rule 10 business days from customer’s notice of for financial institution to resolve error.
    • Countdown begins when the consumer provides verbal notice (telephone call) of the error, even if written confirmation required.
Exception:   New account (less than 30 days old) financial institution has 20 business days from customer’s notice of error to resolve.
  • If financial institution cannot complete its investigation within 10 business days, investigation period can be extended to 45 days if financial institution:
    • Within 10 days of notice of error, provides the consumer with provisional credit for the amount of the error; AND
    • Notifies the consumer of the date and amount of provisional credit within 2 business days after crediting; AND
    • Gives the consumer full use of the funds during the investigation period.
Exception:  45 days can be extended to 90 days if error involved new account, point-of-sale debit card transaction (swipe your card at register), or a foreign transaction.
Financial Institution’s Notice of its finding of error investigation
  • Finding of no error occurred or a different error occurred – financial institution must notify the consumer within 3 business days of completing its investigation.  Notice must include:
    • Explanation of finding
    • Notice that consumer has right to request copy of documents relied on in making determination.
    • Notice of date the provisional credit will be revered and the amount of the reversal.
    • Notice that the institution will continue to honor checks, transfers and other payments made from the account using the provisional-credited funds, for the period of 5 business days after the notice
  • Finding of error (unauthorized use) – institution must correct error within 1 business day and notify consumer within 3 business days,  The correction includes, where applicable, the crediting of interest and the refunding of any fees imposed by the institution that were caused by the error.
    • Notice must inform consumer that provisional credit has been made final.
Financial Institution’s criminal and civil liability for willful or negligent failure to comply with the EFTA.
  • In an individual action, damages of up to $1,000
  • In a class action, lesser of $500,000 or 1% of the institution’s net worth.
  • Institution’s employees can be fined up to $5,000and up to one year in jail
  • If a financial institution employee ignores a consumer claim of error when, in fact, there was an error, the institution – and possibly the employee – may be subjected to three times the amount of actual damages incurred by the consumer.
How can I stop automatic payments from my bank account?

Notify your bank or credit union that you withdraw your authorization for future payments to the company at least 3 business days before the next payment is scheduled to leave your account.  If you notify your bank or credit union by telephone, you may be required to follow up with a written confirmation, within 14 days.  If you call in your notice, your bank or credit union will advise you of any follow up requirement and provide the mailing address for your written confirmation.   

Additional Resources:

Error Resolution Flow Chart

Learn more about unauthorized withdrawals from the Consumer Financial Protection Bureau.

Federal Reserve Bank of Philadelphia article: Error Resolution Procedures and Consumer Liability Limits for Unauthorized Electronic Fund Transfers