Credit Union Denied Your Fraud Claim? What Military Members and Veterans Need to Know

By Jenelle Dennis | Consumer Protection Attorney | Former CFPB Senior Enforcement Attorney

Federal law gives military members and veterans powerful protections when money disappears from their accounts. Here’s what to do when your credit union says no.

The Consumer Financial Protection Bureau has documented what many military families already know firsthand: servicemembers, veterans, and their families are disproportionately targeted by payment fraud, and the institutions they bank with often fail to make them whole. In 2022 alone, the military community filed more than 1,100 complaints about digital payment apps with the CFPB, nearly double the volume from 2020. The agency found that servicemembers and veterans who lost money to unauthorized transfers were still struggling to recover their funds, with providers routinely failing to provide timely or substantive resolutions.

If your credit union denied your fraud claim, told you the transfer was authorized, failed to credit your account during an investigation, or never gave you a written explanation, federal law may give you more than you think.

Why Military Members Are Particularly Exposed

The CFPB’s research identified several reasons military families face elevated fraud risk. Permanent change of station moves require servicemembers to conduct more online transactions in compressed timeframes, often paying deposits or fees for housing and childcare they cannot inspect in person, creating openings for scammers running fraudulent listings. The frequent need to share personal information during the moving process increases identity theft exposure. And when fraud does occur, servicemembers deployed in different time zones or with limited connectivity may not be able to detect or respond to it quickly.

Steady military income and benefits make servicemembers attractive targets for account takeover fraud. A fraudster who gains access to a bank account linked to regular direct deposits has immediate, predictable value to exploit.

Military members who bank with credit unions should know that federal consumer protections apply equally regardless of where they bank, including at the largest military-focused institutions.

What Federal Law Requires

The Electronic Fund Transfer Act (EFTA), implemented through Regulation E, applies to any consumer electronic fund transfer, including those processed through credit unions. When you report an unauthorized transfer, your credit union has specific, non-negotiable legal obligations.

Wrongful Denial of Unauthorized Transfer Claims

If money left your account without your actual authorization, your credit union is legally required to investigate and, in most cases, restore your funds. The fact that your login credentials or debit card were used does not automatically make the transfer authorized. If a fraudster obtained your credentials through phishing, SIM-swapping, or malware, the transfer was not authorized by you, regardless of how the credit union characterizes it. Consumer negligence is not a defense under EFTA.

Provisional Credit Failures

If your credit union needs more than 10 business days to complete its investigation, it must generally issue a provisional credit to your account so you are not left without funds while it investigates. Many credit unions either skip this step entirely or issue provisional credit and then claw it back without completing a proper investigation. Both are potential EFTA violations.

Investigation Timeline Violations

Your credit union must complete its investigation within 10 business days, or within 45 business days if it issues provisional credit. These are not suggestions. Investigations that drag past these deadlines without proper provisional credit are violations of federal law, and each day of delay while you are out of funds is real financial harm.

Inadequate Written Notices and Documentation

If your credit union denies your claim, it must notify you in writing and explain why. If you request the documents it relied on in reaching its decision, it must provide them. Denials delivered by phone, denials with no explanation, or investigations that simply close with no written follow-up may be independently actionable, separate from whether the underlying transfer was unauthorized.

DC, MARYLAND & VIRGINIA NOTE

The Washington DC metro area has one of the highest concentrations of active duty military, veterans, and federal employees in the country, with major installations in Virginia, federal agencies across DC, and a large veteran population throughout the region. DC, Maryland, and Virginia each have consumer protection statutes that can provide additional remedies when a financial institution mishandles an electronic transfer dispute. You may have claims under the DC Consumer Protection Procedures Act, Maryland’s Consumer Protection Act, or the Virginia Consumer Protection Act, in addition to your federal rights under EFTA.

What To Do If Your Credit Union Denied Your Claim

Act immediately. EFTA has strict reporting timelines. You generally must report an unauthorized transfer within 60 days of the bank statement reflecting it. If you have not yet submitted a written dispute, do so today and keep a copy of everything.

Document the credit union’s response. Note the date you submitted your dispute, whether you received a written response, whether provisional credit was issued, and how long the investigation took. These details are the foundation of any legal claim.

Request the investigation file. Under EFTA, you are entitled to the documents the credit union relied on in denying your claim. Submit a written request and keep a record of whether and when you receive a response.

File a complaint with the NCUA. Credit unions are supervised by the National Credit Union Administration. Filing a complaint at ncua.gov creates a regulatory record and can prompt a response from an institution that has gone silent.

File a complaint with the CFPB. Submit a complaint at consumerfinance.gov/complaint. The CFPB tracks complaint patterns and has taken action against institutions with systemic EFTA failures.

Consult a consumer protection attorney. EFTA provides for recovery of actual damages, statutory damages, and attorney’s fees. An attorney can often take your case without any upfront cost to you.

Frequently Asked Questions

Does federal law apply to credit unions the same way it applies to banks?

Yes. The Electronic Fund Transfer Act and Regulation E apply to all financial institutions that hold consumer deposit accounts, including credit unions of any size. Being a member-owned institution does not exempt a credit union from its legal obligations when you report an unauthorized transfer.

What counts as an unauthorized transfer under federal law?

An unauthorized transfer is one initiated by someone other than you, without your actual authority, from which you receive no benefit. This includes transfers made by a fraudster who obtained your login credentials through phishing, SIM-swapping, malware, or data breaches. The fact that your credentials were used does not make the transfer authorized. What matters is whether you actually approved it.

How long does my credit union have to investigate my fraud claim?

Your credit union must complete its investigation within 10 business days of receiving your dispute. If it needs more time, it must issue a provisional credit to your account and complete the investigation within 45 business days. Investigations that exceed these timelines without proper provisional credit are violations of federal law.

What is provisional credit and is my credit union required to provide it?

Provisional credit is a temporary restoration of disputed funds to your account while the investigation is ongoing. If your credit union cannot complete its investigation within 10 business days, it is generally required to issue provisional credit so you are not left without access to your money during the process. Clawing back provisional credit without completing a proper investigation is itself a potential EFTA violation.

My credit union denied my claim over the phone and gave no written explanation. Is that allowed?

No. Under Regulation E, your credit union must provide written notice of its findings. If it denies your claim, it must explain why in writing. A phone call is not sufficient. If you requested documentation and received none, that failure may be independently actionable.

Can I sue my credit union for denying my fraud claim?

Yes, in many cases. EFTA provides a private right of action, meaning you can sue your financial institution directly in federal court. If you prevail, you may recover your actual losses, statutory damages, and attorney’s fees. The attorney’s fees provision means a consumer protection attorney can often take your case on contingency with no upfront cost to you.

I am on active duty and did not notice the unauthorized transfers right away. Have I lost my rights?

Not necessarily. EFTA provides extended reporting windows in certain circumstances, and courts have considered the unique challenges faced by deployed servicemembers. Do not assume a delayed report ends your claim. Consult a consumer protection attorney to assess your specific situation before accepting a denial as final.

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