District Court (Cal.) Says EFTA Permits Bank to Charge Stop-Payment Fees

This case involves a consumer’s right to authorize his bank to transfer funds electronically to third parties through what is aptly named an “electronic fund transfer.” Such transfers are governed by the Electronic Fund Transfer Act (“EFTA”), 15. U.S.C. § 1693. If a consumer has authorized a financial institution to transfer funds on his behalf, the EFTA provides the consumer the right to “stop payment” of those preauthorized transfers—that is, to withdraw his authorization. Id. § 1693e. In practice, in order to stop payment, the consumer may be required by his financial institution to pay what is known as a “stop-payment fee.” Plaintiffs James Foreman and Alvin Moody allege that Defendant Bank of America, N.A. (“BOA”) charges such a fee. Plaintiffs contend that BOA’s stop-payment fee, in combination with several other alleged impositions to stopping payments, violates the EFTA and California’s Unfair Competition Law. . . .On its face, the SAC seemingly asserts two theories of liability under the EFTA. First, Plaintiffs appear to claim that any imposition of a SPF violates the EFTA. For example, the common questions in the class allegations include “[w]hether [BOA]’s assessment of SPFs on recurring EFTs violated the EFTA” and “[w]hether [BOA]’s assessment of SPFs hinders, impedes, and deters consumers from exercising their right under the EFTA and 15 U.S.C. § 1693e(a) to stop payment on EFTs ….” SAC ¶ 54(b), (c). Likewise, in claiming BOA violated § 1693e, Plaintiffs allege that “[i]n violation of 15 U.S.C. § 1693e(a), and as a common practice, [BOA] assesses a $30 ‘stop-payment fee’ when a consumer instructs [BOA] to stop a recurring EFT.” Id. ¶ 63; see also Opp. at 1, ECF 27 (“The Bank’s Fee is an unlawful imposition on consumers’ federal right to stop preauthorized electronic fund transfers.”). Second, Plaintiffs appear to claim that the imposition of a $30 fee unlawfully hinders the rights of certain consumers—namely, those for whom $30 is unduly burdensome because of their limited means. For example, the SAC contains allegations emphasizing Plaintiff Foreman’s attempt to get out from under predatory loans, SAC ¶¶ 34–38, and notes that Plaintiff Moody is indigent and suffered an overdraft fee because of BOA’s alleged failure to stop his payment, id. ¶¶ 43–44. See also Opp. at 1 (arguing that BOA violates the law “by requiring consumers—especially indigent ones—to pay a $30 stop-payment fee”).  Despite these allegations, Plaintiffs argued at the hearing on the motion to dismiss that they do not assert either of these theories. See Hearing Tr. 14: 3–6 (disavowing claim that “any fee” violates the EFTA); id. 13:16–18, ECF 47 (disavowing any claim that there is a “sliding scale” of fees “based on an ability to pay” that would violate the EFTA). Contra Opp. at 13 (“The Bank violates § 1693e when it uses the Fee to impede, hinder, and deter consumers—especially indigent ones—from exercising their right to stop payment of an EFT.”). Instead, they ostensibly seek to assert a theory not readily apparent on the face of the SAC—namely, that the $30 fee in combination with the required notice to the third-party payee and the requirement that the stop-payment notice to BOA be technically precise impede consumers to such a degree that BOA violates the EFTA as a matter of law.² See Hearing Tr. 4:21–5:1, 8:25–9:7; see also SAC ¶¶ 33, 69 (referring to the “contractual provisions,” not just the $30 SPF, as violating the EFTA). That this theory is not discernible from the face of the SAC is just one of its problems. Another, albeit related, problem, is that Plaintiffs’ support of this theory is internally inconsistent. They argue that BOA’s impositions to stopping payments are contrary to the EFTA on its face. The EFTA states that a consumer may stop payment by doing two things: (1) “notifying the financial institution … up to three business days preceding the scheduled date of the transfer; and (2) if the stop payment request is made orally, the “financial institution may require written confirmation to be provided to it within fourteen days.” 15 U.S.C. § 1693e. Plaintiffs seemingly argue that this provision imposes two and only two requirements on a consumer for stopping payments, such that additional requirements “not contemplated by the statute” impede a consumer’s ability to exercise his right to stop payment. See Hearing Tr. at 5:14–17; see also Opp. at 4, 13. But this argument does not support Plaintiffs’ espoused theory. Instead, this argument supports the theory that any imposition not expressly enumerated in the statute violates the statute. That is, it supports the theory that any stop-payment fee, be it $1 or $30, violates the statute, because SPFs are not contemplated by the statute. Yet Plaintiffs expressly disclaim this theory. Even assuming that Plaintiffs’ theory were clear from the face of the SAC and their arguments more clearly bolstered that theory, the SAC fails for an additional reason. Plaintiffs do not allege facts to plausibly state a valid claim that these impositions violate the EFTA as a matter of law. This is so because Plaintiffs do not allege facts that they personally were impeded, hindered, or delayed by the $30 SPF (much less the two other impositions). Indeed, each Plaintiff alleges that he paid the fee, seemingly without delay. SAC ¶¶ 40–41 (Foreman); id. ¶ 46 (Moody). Though Plaintiffs argue that “the $30 Fee ‘inherently [preclude[d] Plaintiff[s] from stopping payment],’ ” Opp. at 15 (quoting Simone v. M & M Fitness LLC, No. cv-16-01229-PHX, 2017 WL 1318012, at *3 (D. Ariz. Apr. 10 2017)), they do not allege such preclusion. There are no allegations that would allow this Court to determine that these impositions worked in tandem to impede or hinder Plaintiffs’ rights to stop payments, much less that these impositions together are somehow so drastic that they hinder consumers as a matter of law. There is simply no alleged causal link between BOA’s impositions and Plaintiffs’ abilities to exercise their rights to stop payments under the EFTA.  Thus, Plaintiffs fail to state a claim under the EFTA. Because violations of the EFTA serve as the predicate to Plaintiffs’ UCL claim, that claim fails as well.