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Financial Services Law Insights and Observations

2nd Circuit: Confirmation email to consumer satisfies EFTA’s written authorization requirement

Courts Appellate Second Circuit EFTA State Issues CFPB


On March 20, the U.S. Court of Appeals for the Second Circuit partially affirmed a district court’s order granting summary judgment in favor of one of two defendants on plaintiff’s Electronic Funds Transfer Act (EFTA) claims, holding that the defendant satisfied its EFTA obligations by providing the plaintiff a confirmation email containing the material terms and conditions authorizing a recurring monthly charge to the plaintiff’s debit card. However, the appellate court vacated the district court’s dismissal of the plaintiff’s Connecticut Unfair Trade Practices Act (CUTPA) claims against the defendants for lack of subject matter jurisdiction and remanded for further proceedings. The plaintiff contended that one of the defendants—a discount club operator—failed to provide him with a written copy of the authorized electronic fund transfer after he joined the defendant’s fee-based monthly discount club. The plaintiff filed a putative class action lawsuit against the defendant club operator, as well as the retailer from whom he purchased a video game online, alleging, among other things, that the defendant violated the EFTA, and that both defendants engaged in “unfair or deceptive trade practices in violation of CUTPA.” The district could granted summary judgment in favor of the defendants on both claims.

The opinion discusses the 2nd Circuit’s holding from the plaintiff’s first appeal, in which the appellate court previously held “that the district court improperly rested its decision on evidence outside the scope of [the plaintiff’s] complaint,” with respect to the claim that the defendant failed to provide “‘a copy of such authorization’” to the plaintiff, as required by the EFTA. In addressing the plaintiff’s second appeal, the 2nd Circuit considered the plaintiff’s argument that the defendant failed to satisfy the EFTA’s requirements because it did not provide him with a “duplicate or facsimile of the Enrollment Page on which he authorized recurring payments.” The appellate court determined that: (i) the EFTA does not require the defendant to provide the plaintiff “with a duplicate of the webpage on which he provided authorization for recurring fund transfers”; and (ii) the defendant’s confirmation email to the plaintiff was sufficient to satisfy its EFTA obligations. The appellate court emphasized that, despite the parties’ “dueling dictionary definitions” of “copy” and “authorization,” the “EFTA’s stated purpose of consumer protection would be served whether the term ‘copy of such authorization’ is read to mean a duplicate or a summary of material terms.” The appellate court also highlighted the CFPB’s Official Interpretation of Regulation E, which states that a person “‘that obtains the [payment] authorization must provide a copy of the terms of the authorization to the consumer either electronically or in paper form.’ 12 C.F.R. Pt. 205, supp. I, §10(b), cmt. 5 (emphasis added).”

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