Michigan First Lacks ‘Indemnification’ Remedies Under EFTA: T-Mobile

T-Mobile’s failure to stop SIM-swap fraudsters from draining customers’ bank accounts forces financial institutions to replace the pilfered funds when required to do so under the Electronic Fund Transfer Act, and First Michigan seeks repayment of the funds from T-Mobile (see 2302060049). Michigan First “fails to state a claim for indemnification or contribution for a federal liability under the EFTA because the EFTA does not provide for those remedies,” said T-Mobile’s motion to dismiss. In enacting “a comprehensive statutory scheme governing unauthorized transactions,” Congress could have but didn’t create “a mechanism for financial institutions to seek indemnification or contribution from others to pay for their statutory obligations,” it said. The court should decline Michigan First’s invitation to create "a new legal remedy Congress did not authorize.” In raising a claim for indemnification or contribution for a “state liability” under the Michigan Electronic Funds Transfer Act (MEFTA), the statute can’t be “the source for Michigan First’s claims” against T-Mobile, it said. The Federal Reserve Board “has determined the sole MEFTA provision on which Michigan First relies is preempted by the EFTA,” it said. “Michigan First therefore has no MEFTA liability,” it said. “Contribution and indemnity claims based on the MEFTA are preempted because allowing those claims would allow remedies -- contribution and indemnity -- not available under federal law.”