Liability for fraudulent ACH chargeback dispute with $20,000 damages.

Question

I am the victim of a fraudulent ACH chargeback dispute filed by my mother, who had agreed to assist me with my bills for 6-8 months. She gave me access to her bank account with verbal permission to use funds to pay my bills. Due to a separate issue, she threatened to reverse all funds by filing chargebacks. The bank employee handling the chargeback knew I had authorized access since I helped set up the account and had several phone conversations with him. Despite my efforts to clarify the situation, the bank seems unresponsive to my appeal. So far, this has resulted in approximately $20,000 in damages. I am located in Florida, and my mother is located in California. Are both my mother and the bank liable for any damages caused?

Martin George Prego · Answer

Under federal law, potential liability for your mother and the bank in this ACH chargeback dispute involves multiple legal considerations: 
 
1. Your Mother’s Potential Liability 
Your mother may be liable for fraud or unjust enrichment based on the following factors: 
 
Fraudulent Chargeback Claims: If she knowingly authorized you to use her account and later misrepresented the transactions to the bank as unauthorized, she may be liable for fraud. 
Unjust Enrichment: If she benefited from the funds being used for your expenses and then reversed them, she may be liable for unjustly retaining money that she initially consented to you using. 
Potential Civil Claims: You could pursue civil remedies under Florida or California law for fraud, unjust enrichment, or even conversion if she falsely claimed the transactions were unauthorized. 
2. The Bank’s Potential Liability 
The bank's role in this dispute hinges on its compliance with Regulation E (Electronic Fund Transfer Act, 15 U.S.C. § 1693 et seq.) and the NACHA Operating Rules governing ACH transactions. Key points include: 
 
Negligence or Wrongful Reversal: If the bank was aware that you had authorized access and still reversed the transactions without proper investigation, you might have a claim for negligence. 
Failure to Conduct a Reasonable Investigation: Under Regulation E, banks must conduct a reasonable investigation into disputed transactions. If the bank knew or should have known that your mother had authorized the transfers but still approved the chargebacks, it could be liable for failing to investigate properly. 
Breach of Banking Regulations or Internal Policies: If the bank failed to follow its own dispute resolution procedures or NACHA rules, this could form the basis for a breach of contract or negligence claim. 
Jurisdictional Considerations 
Since the transactions occurred across state lines (Florida and California), federal jurisdiction could apply. 
You may need to bring claims in state or federal court, depending on the applicable laws and amount in controversy. 
Next Steps 
Demand Letter: Consider sending a formal demand letter to both your mother and the bank outlining the fraudulent nature of the chargebacks and requesting reimbursement. 
Banking Complaint: File a complaint with the Consumer Financial Protection Bureau (CFPB) and your state’s banking regulator. 
Legal Action: If the bank fails to respond and your mother refuses to return the funds, you may need to consider filing a lawsuit in small claims or civil court for damages. 
If your mother intentionally misrepresented the transactions, you may have a strong claim against her. The bank’s liability depends on whether it followed Regulation E and NACHA’s dispute resolution rules. If it failed in its investigation, it could be liable for negligence or wrongful reversal of funds.

Q: Liability for fraudulent ACH chargeback dispute with $20,000 damages.