When It Comes to Payment Platforms, Who Should Be Left Holding the Bag?

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Regardless of the size of your credit union, the fact that “Venmo” has already become a verb – “I will Venmo you the money” – is a sure sign that your members expect this service as part of their basic banking services. This is why one of the top 10 issues that yours truly predicted credit unions would have to confront this year was figuring out their legal obligations in relation to third-party payment platforms such as Zelle and Venmo. Unfortunately, the erstwhile Electronic Funds Transfer Act and its accompanying Regulation E has been outpaced by the technology. The resulting confusion is costing credit unions money for which they should not be responsible (by the way, this prediction was slightly better than my prediction of a San Francisco 49er/Cincinnati Bengal Superbowl).

A recent decision involving Navy Federal Credit Union ($156.6 billion, Vienna, Va.) is one of the first to provide some much-needed guidance in this area. See Wilkins v. Navy Fed Credit Union, No. 22-2916 (SDW)(ESK), 2023 BL 15815 (D.N.J. Jan. 18, 2023), Court Opinion. Navy Federal had a retired member who decided she was going to keep up with the times by signing up with Venmo. To use this and similar services, you provide a third-party with access to your debit card and, in return, the third-party will facilitate transfers out of your debit card by using an email request. This member received a phone call from her local New Jersey power company, warning her that she would lose her power if she did not make immediate payment. At their request, she immediately Venmoed funds to the utility.