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Federal Judge: Citigroup Must Face Claims That It Failed to Protect Customers from Fraud


— January 23, 2025

In her lawsuit, James said that scammers and con artists have stolen millions of dollars from Citibank’s customers. Many of these acts could have been prevented, James claimed, if Citibank’s security systems were better-equipped to investigate red flags, like accessing an account from an unrecognized device.


A federal judge has rejected Citigroup’s request to dismiss a lawsuit filed by New York Attorney General Letitia James, who claims that it has failed to protect Citibank customers from online scams.

On Tuesday, U.S. District Judge Paul Oetken said that Citigroup’s subsidiary, Citibank, must face James’ claims, including an allegation that it violated a 1978 federal law related to electronic wire transfers. In his ruling, Oetken noted that Congress intended this legislation, the Electronic Fund Transfer Act, to protect consumers from sophisticated scams involving advanced technology.

Citibank had earlier asked that the case be dismissed on grounds that the Electronic Fund Transfer Act excludes acts of fraud involving wire transfers.

“Citibank’s reading would operate in derogation of the statutory purpose,” Oetken wrote in his 62-page decision.

Although Oetken did dismiss some of James’s claims against Citigroup, he will let the attorney general litigate others, including those relating to the Electronic Fund Transfer Act.

James said that she hopes the ruling will send a message that banks need to do better in protecting customers from fraud.

“When New Yorkers deposit money in a bank, they expect it to be kept safe from scammers and thieves,” she said.

A gavel. Image via Wikimedia Commons via Flickr/user: Brian Turner. (CCA-BY-2.0).

In her lawsuit, James said that scammers and con artists have stolen millions of dollars from Citibank’s customers. Many of these acts could have been prevented, James claimed, if Citibank’s security systems were better-equipped to investigate red flags, like accessing an account from an unrecognized device.

Citigroup has acknowledged that online wire fraud is a “real” problem, but said that banks shouldn’t be held liable for customer losses if and when reasonable security measures have been put in place. In court filings, Citigroup said that it does have effective safeguards, which prevent “countless” transactions daily.

“No system will catch every scam every time,” Citigroup said, adding that the solution should not be a lawsuit that could “abruptly and dramatically upset how banks have organized their policies and practices for decades.”

James’s lawsuit was initially filed on behalf of two plaintiffs, one of whom had $40,000 stolen from her retirement savings account after clicking on a text message that appeared to be from Citi.

After she realized that it was likely a scam, she contacted the bank, which told her not to worry. However, three days later, she found that the scammer had changed her online banking password and signed up for online wire transfers. Citibank purportedly refused to reimburse her losses.

The other plaintiff had $35,000 stolen from her account after finding a message that it had been suspended. The message directed her to call a phone number to restore service; the number routed her to scammers, who sent “Citi codes” to her phone to “verify” recent suspicious activity. The scammer then used the codes to access the woman’s account, change her passwords, and transfer her money out.

Sources

Citigroup Faces Lawsuit Over Alleged Failure to Protect Customers from Online Scams

Citigroup must face New York lawsuit over handling of fraud scams

Citigroup urges dismissal of ‘misguided’ New York lawsuit over fraud scams

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