Unauthorized fraudulent ACH withdrawals - what to do - is the bank liable

[Modee]

I ran into this while I was away. A few thousand dollars were siphoned off via fraudulent ACH (electronic funds transfer - the equivalent of a virtual check) withdrawals from one of my business bank accounts. It's not clear yet exactly how this was done, but it seems like someone merely used my bank account number to withdraw money via ACH.

So, how to go after the bank? Many will say that there is only a 60 day window, at least for consumer accounts, in which to report to the bank the fraud. Some say that the window for business accounts is even lower, only 24 hours.

And then there is Regulation E (12 C.F.R. 205), which allows for fraud claims well beyond that 60 day deadline, but is only for consumer not business accounts.

However, I think that the correct rule is the simple one year statute of limitations to sue the bank for paying a forged check, which an e-check (or ACH) is really no different from a paper check nowadays. There is case law (example, Allied Concord Financial Corp. v. Bank of America, 275 Cal. App 2d 3, Civ. No. 33150, Second Dist., Div. Two, July 7, 1969 (holding that a bank is liable for forged checks presented against a depository’s account for one year)) that supports this, plus in California, the CA Commercial Code including section 4406.

[Modee]

I filed notarized affidavits of fraud with the bank a couple of weeks ago and today all of the stolen funds were returned. Mind you, two of the transactions were months old but I still got the money back.

In contacting the bank, I had threatened to sue and cited the above cases and the CA Commercial Code.

I was getting ready to make a second complaint to the Comptroller of Currency when the funds came in.