New York's top lawyer, Letitia James, filed a lawsuit against Citibank on Tuesday. The lawsuit accuses the bank of not doing enough to stop unauthorized access to customer accounts and not giving money back to victims of online fraud.
According to a statement, the suit alleges that Citibank doesn't have adequate measures to prevent account hacking, gives false information to people who have been defrauded, and unlawfully refuses to return their lost funds.
Citibank Accused of Costing New Yorkers Millions
"The New York Attorney General's office has accused Citibank of failures that have led to the loss of millions of dollars for its customers, including, in some instances, their entire life savings.
Attorney General Letitia James criticized Citibank, saying, 'Banks are meant to be a secure place for money, yet due to Citi's carelessness, scammers have taken millions from diligent citizens.'
She emphasized the importance of online banking for New Yorkers who use it to manage their finances and save for significant life events. James pointed out that a bank's primary responsibility is safeguarding its customers' accounts, and failing to do so is a severe breach of trust.
Meanwhile, a spokesperson from Citibank stated that the bank has improved its security measures, leading to a notable decrease in wire fraud cases. However, the spokesperson emphasized that Citibank has complied with all legal and regulatory requirements regarding wire transfers.
The spokesperson further explained that banks are not obligated to refund customers who have acted on fraudulent instructions if the bank has no evidence of deception.
The lawsuit filed by Attorney General Letitia James demands that Citibank return any profits gained from these practices, pay a fine of $5,000 for each legal violation, and hire an independent monitor to identify all affected customers.
James highlighted the challenges customers face reporting fraud, including long wait times on calls and misleading assurances from Citibank about reimbursements despite the bank not taking immediate action to retrieve the lost funds.
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Lawsuit Claims Citibank Must Reimburse Fraud Victims
The lawsuit contends that by providing wire transfers through online and mobile banking apps, Citibank is obligated to compensate fraud victims under the Electronic Fund Transfer Act (EFTA).
In response to the allegations, a spokesperson from Citibank informed PYMNTS that the bank adheres to all wire transfer laws and regulations. The spokesperson also mentioned the bank's efforts to prevent fraud and its commitment to aiding clients in recovering their losses when feasible.
The lawsuit includes the accounts of two individuals who fell victim to fraud. In one instance, a customer had $40,000 taken from her retirement savings account in 2021 after clicking a link in a text message that appeared to be from Citibank.
Initially, she reported the suspicious activity and was reassured. However, three days later, she discovered that a scammer had altered her banking password and enrolled in online wire transfers, leading to the bank denying her fraud claim.
In another case, a New Yorker had $35,000 stolen after receiving a message in her online account stating it had been suspended, along with instructions to call a specific phone number.
A scammer, pretending to be from Citibank, promised to send verification codes for recent suspicious activity. Instead, the scammer transferred all the money from the customer's three savings accounts to her checking account, changed her online passwords, and made off with the $35,000.
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