Identity Theft and the Electronic Funds Transfer Act (EFTA)

Know what to do when you are a victim of bank account identity theft

Credit card on a fish hook, representing identity theft.
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Stealing your debit card is one common way identity thieves can access your bank account, but it's not the only one. For instance, when you pay for something by check, you’re handing over your bank account number and routing information to the merchant, the salesperson, and anyone else involved in the processing of your purchase. Armed with this information, identity thieves who make a small investment in the right kind of check printing software can begin stealing money from your bank account.

When someone gains unauthorized access to your bank account, the act is a form of identity theft. But the bank may call it account fraud, unauthorized withdrawal, or even true-name fraud. Whatever language is used, you need to know what to do and how you're protected. The Electronic Funds Transfer Act (EFTA) provides you with some protection from bank account fraud, but it's limited. If you believe that an identity thief has access to your debit card or checking information, you must take action immediately.

The Basics of the Electronic Funds Transfer Act 

The EFTA provides banks with some guidelines on how to resolve disputes with debit cards. However, the onus is on you, the account holder, to recognize unauthorized transactions on your account. To catch bank account identity fraud sooner rather than later, make a habit of reconciling your bank account each month when you receive your bank statement. If you have numerous deposit and debit transactions, reconciling your account twice a month could be a wise habit. If you notice an error, report it immediately.

If you wait, you could be out of luck. According to the EFTA, you have limited liability for the losses you incur depending on how soon you report the fraud:

  • If the error is reported within two business days, your loss is limited to $50.
  • If the error is reported within 60 days, your loss is limited to $500.
  • If the error is reported past 60 days, you probably will be out the money and any overdraft fees.

Information Your Bank Needs to Investigate the Crime

To begin investigating your claim, you must provide certain information to your bank. The following details are helpful in determining the steps the bank needs to take to resolve your dispute, based on EFTA rules:

  • Your name and account number
  • Why you think there is an error
  • The amount of the error
  • The date for the error

Many banks request that you provide this information in writing no later than 10 days after you initiate a dispute.

If the account has been active for more than 30 days, the bank will do an investigation and get back to you within 10 days. If a bank needs more time, it can take up to 45 days but will credit the funds back to your account while it investigates. The bank should inform you if the investigation will take longer than normal.

If the account is less than 30 days old or you’re disputing point-of-sale or foreign transactions, it may take up to 20 days to apply the temporary credit to your account. It also may take up to 90 days to finish the investigation.

Authorized Users vs. Unauthorized Charges

If the bank's investigation doesn’t support your claims, it will notify you in writing and take the credits back from your account. One reason it may not support your claim is excessive use by an authorized user. In other words, if you let your son use your card, and he spends more than you told him he could, the bank won't consider that an identity theft because you gave him permission to use the card.