New York Attorney General Letitia James filed a lawsuit against Citibank on Tuesday, alleging the big bank failed to do enough to protect and reimburse victims of fraud.
The lawsuit argues that New York customers lost millions of dollars — in some cases their entire lifesavings — to scammers and hackers because of Citi’s weak security and anti-fraud measures.
According to the NY AG, Citi does not do enough to prevent unauthorized account takeovers, illegally refuses to reimburse fraud victims and “misleads” customers about their rights after their accounts are hacked.
The lawsuit, filed in US District Court for the Southern District of New York, alleges that Citi has “overpromised and underdelivered on security” and failed to respond appropriately to red flags.
“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 NY AG alleges that Citi gets customers to sign “coerced” affidavits that allows the bank to treat claims of fraud to 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.”
Due to an “industry-wide surge” in wire fraud over the past few years, Citi said it has taken steps to proactively safeguard its client accounts with the latest security, fraud prevention tools and information about scams.
“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.
Still, the NY AG alleges Citi hasn’t done enough to protect 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.
For example, 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 Citi but was actually from a scammer who changed her password and transferred money, according to the NY AG.
“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.
In another example, the NY AG said a customer lost $35,000 to a scammer who changed her online passwords and tried to transfer the money. While Citi initially tried to verify the wire transfer by calling the customer, who was working and did not see the call, the bank 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 said.
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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