Credit Union Not Liable for Fraudulent Transactions Authorized by Account Holder

The United States District Court for the District of New Jersey has held that a credit union is not liable for transactions that were fraudulently initiated but then authorized by the account holder.  The Court found that while the transactions may have been fraudulent, they were nonetheless authorized by the account holder and the credit union could not be held responsible under its Deposit Agreement.  Wilkins v. Navy Federal Credit Union.

Jacqueline Wilkins had an account at Navy Federal Credit Union.  As part of that account, Navy Federal made available the Zelle money transfer service.  In March 2021, fraudsters posing as utility company representatives tricked Wilkins into sending them almost $3,000 through the Zelle payment service.  When she discovered the fraud, Wilkins notified Navy Federal that the transactions were fraudulent, but Navy Federal declined to reimburse the transactions.  Plaintiff sued alleging, among other claims, that Navy Federal breached its contract with her by failing to reimburse her for unauthorized transactions pursuant to the Deposit Agreement.  The District Court disagreed.

Navy Federal’s Deposit Agreement stated in bold typeface that unauthorized transactions where those where a depositor’s account was accessed without authority or money was transferred without permission.  While the Plaintiff may have been fooled by the fraudsters into sending them money, “The Complaint alleges that she, in every sense of the word, authorized the four separate transactions…[that] were neither unauthorized nor the result of fraudulent use of her Zelle account.”  Where Plaintiff herself authorized those transactions, Navy Federal has no obligation under the Deposit Agreement to reimburse her for the fraudulent actions of others unconnected to her account.

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