Today, we’re doing something a little different and turning the blog over to someone who brings real insight and experience to the topic. Our guest contributor brings deep expertise on wire transfers, Regulation E, and Article 4A and unpacks why a closely watched federal case in New York could have real implications for credit unions. Please welcome Mitch Pollack, the New York Credit Union Association’s General Counsel and managing member and founder of Mitchell Pollack & Associates.

For decades, credit unions and banks have operated under clear and predictable rules for fund transfers. Consumer electronic fund transfers are governed by Regulation E, while wire transfers fall under UCC Article 4A. That distinction has rarely been questioned—until now.

The New York Attorney General’s lawsuit in New York v. Citibank challenges whether a wire transfer initiated by a consumer, through online or mobile banking, remains an Article 4A transaction, or whether it should instead be treated as a Regulation E electronic fund transfer.

The New York Attorney General’s Theory

The Attorney General alleges that Citibank failed to adequately prevent account takeovers, allowed fraudsters to initiate wire transfers from compromised consumer accounts, and improperly denied reimbursement by asserting that Regulation E did not apply.

The state’s central argument is that when a consumer initiates a wire through online or mobile banking, the transaction qualifies as an “electronic fund transfer” under the Electronic Fund Transfer Act—despite long-standing industry practice and case law treating wire transfers exclusively under Article 4A.

To support this position, the Attorney General advances a “transaction-splitting” theory, dividing a wire transfer into three steps:

1. The consumer submits payment instructions through online or mobile banking;
2. The financial institution processes the payment and sends funds through a wire network; and
3. The recipient’s account is credited

Under this approach, steps one and three are characterized as Regulation E transactions, even if the wire itself remains governed by Article 4A.

Citibank moved to dismiss the Complaint arguing that Regulation E doesn’t apply and UCC Article 4A governs wire transfers. The U.S. District Court for the Southern District of New York declined to dismiss the Regulation E claims at the pleading stage, allowing the theory to proceed. This was not a decision on the merits. The case is now on appeal before the Second Circuit, with final briefing due in January 2026.

Why Credit Unions Should Care

Article 4A was designed to promote certainty, speed, and finality in wire transfers. It allocates risk based on whether the financial institution employed commercially reasonable security procedures and acted in good faith. When those standards are met, courts have historically placed fraud losses on the customer, rather than treating the institution as an insurer.

The Attorney General’s lawsuit seeks to upend that framework by reclassifying consumer-initiated wires as Regulation E transactions. If that position ultimately prevails, the implications for credit unions could be significant:

• Article 4A’s loss-allocation rules may no longer apply to consumer wires;
• The commercially reasonable security defense may lose its protective value;
• Regulation E notice, investigation, and reimbursement requirements could be imposed on wire transfers; and
• The long-standing principle of finality in wire payments could be eroded.

In practical terms, this would increase fraud exposure, operational burden, and reimbursement risk for credit unions offering online or mobile wire capabilities.

What Credit Unions Should Do Now

While the Citibank case remains unresolved, credit unions should treat it as a regulatory warning sign and take proactive steps to mitigate potential exposure—particularly for consumer-initiated wire transfers through online or mobile banking.

Review consumer wire disclosures and agreements. Ensure account agreements, wire transfer disclosures, and online banking terms clearly describe how consumer-initiated wires are handled, including governing law, security procedures, and member responsibilities. Ambiguities may be scrutinized if Regulation E arguments gain traction.

Reevaluate wire fraud controls for consumer channels. Assess whether existing wire security procedures—especially those tied to online and mobile banking—remain commercially reasonable in light of evolving fraud tactics. This includes authentication, anomaly detection, callback procedures, and transaction monitoring.

Document good-faith compliance efforts. Maintain clear records showing how wire transfers are reviewed, approved, and processed, and how security controls are evaluated and updated. Demonstrating good-faith adherence to Article 4A standards remains critical.

Train staff on consumer wire risk. Front-line staff should be trained to identify account takeover indicators and social engineering red flags, particularly when members request urgent or unusual wire transfers.

Monitor legal and regulatory developments. A Second Circuit decision could reshape expectations nationwide. Credit unions should stay engaged through Association updates and be prepared to adjust policies quickly if the legal landscape shifts.

The New York Credit Union Association Response

Recognizing the stakes, the Association—along with other industry participants—filed an amicus brief supporting Citibank’s position that Article 4A governs consumer-initiated wire transfers. We will continue to closely monitor the case. A decision from the Second Circuit could come in early 2026 and may have broad implications for wire transfer risk management across the credit union system.

Until Next Time

From the big picture to the fine print, we’ve got you covered. Thanks for reading, and CU in the next post.