A federal judge has ruled that Citigroup must face a lawsuit brought by New York Attorney General Letitia James, accusing the bank of failing to protect its customers from online fraud and denying reimbursement to scam victims. The action was reported by Reuters journalist Jonathan Stemple and picked up by USA Today.
The decision, issued by U.S. District Judge Paul Oetken in Manhattan, rejected Citigroup’s efforts to dismiss key claims in the case, marking a significant step forward for the lawsuit.
Citibank Accused of Failing to Safeguard Customers Against Scammers
The Citibank lawsuit, filed in January 2024, alleges that scammers stole millions of dollars from Citibank customers due to the bank’s inadequate security measures. James claimed Citibank failed to investigate critical red flags, including unrecognized devices, suspicious changes to usernames and passwords, and phishing attempts. In one case, a customer reportedly lost $40,000 after clicking a fraudulent text message link that appeared to be from the bank.
“When New Yorkers deposit their money in a bank, they expect it to be kept safe from scammers and thieves,” James says in an official statement.
The lawsuit also accuses Citibank of coercing customers into signing affidavits that limited their ability to recoup losses, only to later reject reimbursement claims outright. The Attorney General’s office is seeking restitution for affected customers over a six-year period, as well as a $5,000 civil fine per violation.
Judge Rules EFTA Protects Consumers in Citibank Fraud Case
Citigroup argued that the Electronic Fund Transfer Act (EFTA) of 1978, cited in the lawsuit, does not apply to wire transfers. Judge Oetken, however, disagreed, stating, “Citibank’s reading would operate in derogation of the statutory purpose.”
He emphasized that the EFTA was designed to protect consumers from complex fraud schemes involving technologies they may not fully understand. The judge acknowledged some of Citigroup’s practices but allowed major claims under the EFTA and related laws to proceed.
Citigroup Defends Industry Standards Amid Fraud Lawsuit Ruling
Citigroup expressed disappointment with the ruling. “The industry-standard practices we employ have long been recognized as satisfying applicable law,” the bank said in a statement. Its representatives added that internal systems prevent “countless” fraudulent transactions daily, acknowledging online wire fraud as a “real” and ongoing challenge.
Holding Citigroup Accountable
The ruling is a victory for James, who said the decision allows her office to ensure Citigroup complies with laws meant to protect consumers. As the lawsuit advances, Citigroup faces potential restitution payments and significant fines if found liable.
Further details on this Citigroup lawsuit and its implications can be found at USA Today.
