A federal judge in New York rejected Citigroup's attempt to dismiss a lawsuit filed by the state Attorney General, Letitia James, alleging that the bank failed to safeguard customers from online scammers and declined to refund victims. U.S. District Judge Paul Oetken in Manhattan ruled that Citigroup's Citibank division would need to address the claims under the 1978 federal law governing electronic wire transfers, as well as parts of three other claims. Judge Oetken underscored that the Electronic Fund Transfer Act aimed to shield consumers from complex fraud involving unfamiliar technologies, placing banks in a position to manage fraud risks effectively.
Contrary to Citigroup's argument that wire transfers were exempted from the law, Judge Oetken emphasized in his 62-page ruling that Citibank's perspective would contradict the law's intended purpose. Although the judge dismissed some claims against Citigroup, the bank expressed disappointment and stated it was reviewing options. Attorney General James asserted that the ruling would ensure compliance by Citigroup with consumer protection laws, emphasizing the importance of safeguarding customers' funds from fraudulent activities.
The lawsuit alleged that scammers defrauded Citibank customers of millions of dollars due to the bank's inadequate security systems in detecting potential threats like unrecognized devices, modified usernames and passwords, and "phishing" attempts. The litigation also accused Citigroup of pressuring customers to sign limiting affidavits hindering their ability to recover losses, subsequently rejecting reimbursement requests. The lawsuit seeks to compensate affected customers denied refunds within a six-year span and impose a $5,000 civil penalty per violation.
While Citigroup acknowledged the prevalence of online wire fraud, it claimed its systems routinely thwart numerous fraudulent transactions daily. The case is titled New York v. Citibank NA, U.S. District Court, Southern District of New York, No. 24-00659.