In a major legal action, New York Attorney General Letitia James has filed a lawsuit against Citibank, accusing the financial institution of failing to defend its customers against hacks and scams and refusing to reimburse victims. The lawsuit alleges that Citibank's actions violate the Electronic Fund Transfer Act (EFTA), which requires banks to compensate customers for lost or stolen funds due to unauthorized electronic transactions.

According to the complaint, Citibank, by offering online and mobile banking services for wire transfers, should provide the same level of compensation to fraud victims as the protections offered to victims of electronic credit or debit card fraud under the EFTA. However, the lawsuit claims that Citibank exploited a specific exception within the regulations, leading to the denial of consumer reimbursement claims after falling victim to scams or getting hacked. This has resulted in significant financial losses for countless New York consumers, totaling millions of dollars.

Attorney General James expressed her concern over Citibank's negligence, stating, "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." She emphasized that if a bank cannot secure its customers' accounts, it is failing in its fundamental duty, and there is no excuse for such behavior from a large financial institution.

The investigation conducted by the New York Attorney General's office revealed several inadequacies in Citibank's response to potential indicators of fraudulent activity. The bank's systems failed to react effectively to unrecognized devices, new locations accessing accounts, and even changes in users' banking credentials. Additionally, Citibank did not flag or prevent attempts to transfer funds from multiple accounts into a single account, enabling malicious actors to swiftly transfer substantial amounts of money within minutes.

Furthermore, the complaint alleges that Citibank did not initiate automatic investigations or report fraudulent activities to law enforcement, even after customers had filed initial reports with the bank. Victims reporting fraud also faced lengthy telephone holds, allowing scammers to continue transferring stolen funds to their bank accounts at other institutions.

Citibank representatives were accused of falsely assuring customers that their funds were secure and promising the return of stolen funds without taking immediate action. The complaint also highlights instances where customers were directed to local Citibank branches to provide detailed affidavits about the scams they fell victim to. Regrettably, this information was allegedly used against the victims, leading to the denial of reimbursement claims.

Attorney General James aims to put an end to Citibank's deceptive practices through this lawsuit. She seeks restitution for victims who were wrongfully denied reimbursement over the past six years, as well as penalties and disgorgement. It is worth noting that two years ago, Attorney General James led a coalition of attorneys general urging major banks to eliminate overdraft fees on consumer accounts.

This lawsuit against Citibank sends a clear message that financial institutions must prioritize the protection of their customers' accounts and act promptly in cases of fraud or hacking. The outcome of this legal action could have significant implications for the banking industry as a whole.