by: Peter J. Gallagher (@pjsgallagher)
Does a bank have a duty to tell authorities that it believes one of the bank's customers is the victim of a scam? In a recent decision — Lucca v. Wells Fargo Bank, N.A. — the Law Division held that banks can report suspected scams (and will generally be shielded from liability against the customer suspected of being scammed if they do) but are not required to do so.
In Lucca, plaintiff made approximately 27 wire transfers totaling roughly $330,000, most of which were sent to Costa Rica to recipients that plaintiff did not know and never met. She did so at the direction of an individual who called her, identified himself as a lawyer, told her that he had a way for her to win some money, and provided her with information about the wire transfers that were part of the alleged money winning proposition. Plaintiff sued her bank and the individual at the bank with whom she interacted in connection with the wire transfers, claiming, among other things, that the bank acted in bad faith when it failed to "disclose the wire transfers to the appropriate authorities." The trial court held a two-day bench trial on this claim and dismissed this claim.
Plaintiff made most of the transfers from her local Wells Fargo branch. She dealt with the same bank employee in connection with them. After the third transfer, this individual, who was also named as a defendant in plaintiff's lawsuit, asked plaintiff if she knew the person to whom she was sending the money. Plaintiff told her to mind her own business. This individual advised plaintiff that she was being scammed and also filed a report with the Wells Fargo internal elder abuse department. (Plaintiff also made several wire transfers from another bank, which had plaintiff review and sign a "Scam Awareness" document after it became concerned about plaintiff's actions. Wells Fargo did not do the same, but it did advise plaintiff that she was being scammed.) Notwithstanding that Wells Fargo told plaintiff that she was being scammed, after she finally realized that the bank was right, plaintiff sued Wells Fargo, claiming that it should have notified the police about the scam. The court rejected this argument.
Under New Jersey law, banks have the option of reporting scams like the one at issue in Lucca to the authorities. The relevant statute, N.J.S.A. 17:16T-1 to -4, was passed to address concerns that banks had raised about sharing confidential information with law enforcement when they suspected that one of their customers was the victim of a scam. Put simply, banks were confused about whether, and to what extent, they could share information with law enforcement without exposing themselves to liability to the customers for sharing the customers' confidential information. The statute provided banks with protection from liability for sharing this information when they suspect that "illegal activity" is, or will be, taking place in connection with an account maintained by a "vulnerable customer" or "senior customer." In Lucca, plaintiff tried to argue that this statute also imposes an affirmative duty on a bank to report suspected scams to the authorities and creates a private cause of action against a bank that fails to do so. The Law Division rejected both of these arguments.
First, the court held that the statute provides that a bank may report its suspicions to the authorities, and it will be protected from liability against the customer if it does, but that a bank is not required to do so. The court held that this conclusion was required by the plain language of the statute and by reference to the Adult Protective Service Act, N.J.S.A. 52:27D-409, which addresses the reporting of suspected elder abuse more generallt. That statute requires certain entities to report elder abuse to the authorities — healthcare professionals, law enforcement officers, firefighters, paramedics, and EMTs — but provides that all other entities may, but are not required to, report such abuse. This reinforced the court's conclusion that the Legislature intended to give banks, like Wells Fargo, the option of reporting suspected scams and other instances of elder abuse but that it did not intend to require them to do so.
Similarly, the court rejected plaintiff's claim that she had a private cause of action against the bank under N.J.S.A. 17:16T-1 to -4. The statute itself does not create a private cause of action and New Jersey courts are reluctant to infer a private cause of action when the Legislature does not provide for one. Moreover, in Lucca, the statute was created to protect banks and permitting a private cause of action would be contrary to the letter and intent of the statute, therefore the Law Division held that no such private right existed.
It is unquestionably sad that plaintiff was scammed out of more than $300,000, but the Law Division made clear that it was not the bank's responsibility to report this scam to the authorities.
Pete's Take 