New York Attorney General Letitia James today sued Citibank, NA (Citi) for failing to protect and refusing to compensate fraud victims.
The lawsuit alleges that Citi fails to implement strong online protections to stop unauthorized account takeovers, misleads account holders about their rights after their accounts are compromised and funds are stolen, and unlawfully denies compensation to fraud victims.
The Office of the Attorney General (OAG) found that the bank was failing to respond to fraudulent activity appropriately and quickly. As a result of Citi’s lax security, New York customers lost millions of dollars, and in some cases, their entire savings, to fraudsters and hackers.
Attorney General James is seeking to hold Citi accountable for failing to protect its customers and require the company to repay defrauded New Yorkers with interest, pay penalties and adopt enhanced fraud defenses to prevent fraudsters from stealing consumer funds.
In addition, Citi does not respond appropriately to fraud alerts from its customers. When victims contact the bank to report fraud, Citi leaves them on long phone holds, allowing fraudsters to continue their fraud. Additionally, Citi does not implement adequate measures to protect consumers from future unauthorized transactions until they visit a local branch.
Citi representatives falsely told consumers their accounts were safe and often promised their money would be returned, although the bank took no immediate action to recover stolen funds. Citi also falsely tells consumers that they must visit local branches and execute special affidavits detailing the fraud that led to their losses — information that Citi then used to incriminate the consumers and deny their claims.
Attorney General James argues that because Citi makes wire transfers available to consumers online and through mobile banking apps, Citi must compensate victims of fraud under the Electronic Funds Transfer Act (EFTA) just as banks compensate victims online credit or debit card fraud. Under the EFTA, banks such as Citi are required to compensate their customers for money in their accounts that is lost or stolen through unauthorized electronic payments.
However, Citi illegally took advantage of a narrow exception to these laws to deny consumers’ claims for compensation, resulting in millions of dollars in damages to New York consumers. Through this lawsuit, Attorney General James seeks to stop Citi’s deceptive practices and collect compensation for victims who have been denied compensation over the past six years, penalties and disgorgement.
Attorney General James encourages all consumers who have lost money to fraudsters who hacked their online or mobile banking, whether the bank accounts were with Citi or any other bank, to report their experiences to OAG’s Office of Consumer Fraud.