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NY Attorney General Sues Citibank For Failing To Protect Customers

According to a report from CNN, on Tuesday, New York Attorney General Letitia James filed a lawsuit against Citibank, one of the largest banks in the United States, alleging that the bank failed to take adequate measures to protect and reimburse victims of fraud. The lawsuit claims that Citibank's weak security and anti-fraud measures resulted in New York customers losing millions of dollars to scammers and hackers, with some losing their entire life savings.

The lawsuit filed in the US District Court for the Southern District of New York alleges that Citibank has "overpromised and underdelivered on security" and has not responded appropriately to red flags. The NY AG alleges that Citibank fails to prevent unauthorized takeovers of customer accounts, illegally refuses to reimburse fraud victims, and misleads customers about their rights after their accounts are hacked.

“Banks are supposed to be the safest place to keep money, yet Citi’s negligence has allowed scammers to steal millions of dollars from hardworking people, James said in a statement. There is no excuse for Citi’s failure to protect and prevent millions of dollars from being stolen from customers’ accounts and my office will not write off illegal behavior from big banks.”

The lawsuit also claims that Citibank gets customers to sign "coerced" affidavits that allow the bank to treat claims of fraud under narrow commercial laws on wire transfers instead of the more substantial protections from the Electronic Fund Transfer Act, a landmark consumer protection law.

“Citi then summarily rejects claims for reimbursement and instead blames consumers,” the lawsuit said.

“Citi closely follows all laws and regulations related to wire transfers and works extremely hard to prevent threats from affecting our clients and to assist them in recovering losses when possible,” a Citi spokesperson said in a statement to CNN. “Banks are not required to make clients whole when those clients follow criminals’ instructions and banks can see no indication the clients are being deceived.”

“Our actions have reduced client wire fraud losses significantly, and we remain committed to investing in fraud prevention measures to help our clients secure their accounts against emerging threats,” the Citi spokesperson said.

Despite claiming that it has proactively safeguarded client accounts from the latest security threats and fraud prevention tools, Citibank allegedly failed to do enough to protect its customers. For instance, in October 2021, a New Yorker had $40,000 stolen from her retirement savings account after being tricked by a text message purporting to be from Citibank, which was actually from a scammer who changed her password and transferred money. 

“For weeks, the customer continued to contact the bank and submit affidavits, but in the end, she was told that her claim for fraud was denied,” the NY AG said.

Similarly, a customer lost $35,000 to a scammer who changed her online passwords and tried to transfer the money. Citibank initially tried to verify the wire transfer by calling the customer, but approved a second attempted wire transfer without getting the customer on the phone.

“She lost nearly everything she had saved, and Citi refused to reimburse her,” the NY AG added.

The NY AG's lawsuit against Citibank comes amid an "industry-wide surge" in wire fraud over the past few years, with scammers and hackers becoming increasingly sophisticated in their tactics. This lawsuit is a significant development in the ongoing efforts to hold financial institutions accountable for their role in preventing and mitigating the impact of fraud on customers.

“Consumers have lost their life savings, their children’s college funds, or even the money needed to support their day-to-day lives,” the lawsuit alleges.

Last year, federal regulators alleged Citi illegally discriminated against Armenian Americans for years, singling them out on credit card applications based on their last names.

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