NY AG Sues Citibank for Failing to Protect Customers from Fraud

NY AG Sues Citibank for Failing to Protect Customers from Fraud

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ATMs at Citigroup’s Citibank branch are seen in New York.

New York

New York Attorney General Letitia James filed a lawsuit against Citibank on Tuesday, alleging the big bank didn’t do enough to protect and compensate fraud victims.

The suit alleges that New York customers have lost millions of dollars, and in some cases their entire lives, to fraudsters and hackers because of Citi’s lax security and anti-fraud measures.

According to the NY AG, Citi did not do enough to prevent account hijacking, illegally denied payment to fraud victims and “burned” customers about their rights after their accounts were hacked.

The lawsuit, filed in the US District Court for the Southern District of New York, alleges that Citi “overpromised and underdelivered on security” and failed to adequately respond to red flags.

“Banks are supposed to be the safest place to keep money, but Citi’s negligence allowed fraudsters to steal millions of dollars from hardworking people,” James said. “There is no excuse for Citi not to prevent and protect the theft of millions of dollars from customer accounts, and my office will not remove illegal behavior from major banks.”

The NY AG alleges that Citi is forcing customers to sign “mandatory” statements that allow the bank to file fraud claims under commercial electronic funds transfer laws, more important protections than the Electronic Funds Transfer Act, an important consumer protection law.

“Citi then denies claims for compensation and instead blames consumers,” the lawsuit said.

“Citi closely monitors all money transfer laws and regulations and works hard to prevent threats from affecting our customers and help them recover losses where possible,” a Citi spokesperson told CNN in a statement. “Banks are not required to make customers whole when these customers follow the criminals’ instructions and the banks see no indication that the customers have been defrauded.”

Due to an “industry-wide increase” in wire fraud over the past few years, Citi said it has taken steps to proactively protect customer accounts with the latest security, fraud prevention tools and fraud information.

“Our actions have significantly reduced customer fraud losses, and we remain committed to investing in fraud prevention measures to help our customers protect their accounts from emerging threats,” a Citi spokesperson said.

Still, the NY AG claims Citi didn’t do enough to protect customers.

“Consumers lost their life savings, their children’s college funds and even money they needed to support their daily lives,” the lawsuit said.

For example, according to the NY AG, in October 2021, a New York resident had $40,000 stolen from his retirement savings account after being tricked by a text message that purported to be from Citi, but was actually from a fraudster who changed the password and transferred the money.

“For weeks, the customer continued to contact the bank and provide statements, but was ultimately told that the fraud claim was denied,” the NY AG said.

In another example, the NY AG said a customer lost $35,000 to a fraudster who tried to transfer money by changing their online passwords. Although Citi first attempted to verify the transfer by calling the customer, who was working and did not see the call, the bank confirmed the second transfer attempt without getting the customer to the phone.

“He lost almost everything he had saved and Citi refused to pay him,” the NY AG said.

Last year, federal regulators alleged that Citi illegally discriminated against Armenian Americans for years, singling them out on credit card applications based on their last name.

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