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Home News Citigroup Faces Lawsuit Over Failure To Protect Customers From Online Fraud

Citigroup Faces Lawsuit Over Failure To Protect Customers From Online Fraud

by Celia

A federal judge ruled on Tuesday that Citigroup must face a lawsuit filed by New York Attorney General Letitia James, accusing the bank of failing to protect customers from online fraud and refusing to reimburse victims.

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U.S. District Judge Paul Oetken in Manhattan rejected Citigroup’s attempt to have the case dismissed, allowing James’ claim to move forward. The lawsuit alleges that Citigroup’s Citibank unit violated the 1978 Electronic Fund Transfer Act, a federal law designed to protect consumers from fraud, particularly involving technologies they may not fully understand.

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Judge Oetken ruled that Congress intended the law to hold banks accountable for fraud risks, especially when they are in a better position to prevent such crimes. Citigroup had argued that the law did not apply to wire transfers, but the judge disagreed, stating that the bank’s interpretation conflicted with the law’s intent.

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While the judge dismissed some parts of the lawsuit, Citigroup still faces claims related to fraud protection and reimbursement for customers. The bank expressed disappointment in the decision and said it was considering its next steps. In a statement, Citigroup maintained that its industry-standard practices meet legal requirements.

Attorney General James hailed the ruling as an important step in ensuring Citigroup protects its customers. “When New Yorkers deposit their money in a bank, they expect it to be kept safe from scammers and thieves,” she said.

James filed the lawsuit in January, claiming that Citibank’s security systems failed to prevent fraud despite clear warning signs, such as unrecognized devices, changes to user accounts, and phishing attempts. One customer allegedly lost $40,000 after clicking a fraudulent link in a text message that appeared to come from Citibank.

The lawsuit also accuses Citigroup of pressuring customers to sign affidavits limiting their ability to recover losses and rejecting reimbursement claims. The case seeks restitution for affected customers and a $5,000 civil fine per violation.

While Citigroup acknowledged that online wire fraud is a significant issue, the bank maintains that its systems successfully block many fraudulent transactions every day.

The case is New York v. Citibank NA, U.S. District Court, Southern District of New York, No. 24-00659.

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