By Mike Fishmore | April 24, 2024

Victim to scams

Citibank is now facing a lawsuit for its failure to compensate customers who suffered financial losses as a result of a security glitch. New York Attorney General Letitia James has brought forth serious allegations against the bank.
 

The lawsuit, filed in the US District Court for the Southern District of New York, claims that Citibank neglected to reimburse individuals who fell victim to scams.
 

Online protections

According to a statement released by James' office, "The lawsuit alleges that Citi does not implement strong online protections to stop unauthorized account takeovers, misleads account holders about their rights after their accounts are hacked and funds are stolen, and illegally denies reimbursement to victims of fraud." 
 

Life savings

According to the Attorney General's office, customers of Citibank were accused to "have lost their life savings, children's college funds, or even money needed to support their day-to-day lives due to Citi's illegal and deceptive acts and practices."
 

Data security

"Defendant Citi has not deployed sufficiently robust data security measures to protect consumer financial accounts, respond appropriately to red flags, or limit theft by scam," the lawsuit said. "Instead, Citi has overpromised and underdelivered on security, reacted ineffectively to fraud alerts, misled consumers, and summarily denied their claims. Citi's illegal and deceptive practices have cost New Yorkers millions."
 

Heartbreaking story

A New York resident shared a heartbreaking story of losing $35,000 in a Citibank scam. After receiving a warning about suspicious activity and interacting with a scammer pretending to be from Citibank, she faced a devastating loss. 
 

Banking password

"Three days later, the customer discovered that a scammer changed her banking password, enrolled in online wire transfers, transferred $70,000 from her savings to her checking account, and then electronically executed a $40,000 wire transfer, none of which was consistent with her past account activity," the AG's office said. "For weeks, the customer continued to contact the bank and submit affidavits, but in the end, she was told that her fraud claim was denied."
 

Raised concerns

Another case involved a customer who raised concerns about suspicious transactions totaling $70,000 at her branch, but her warnings were dismissed. Her account was later compromised.
 

Financial accounts

The legal action argues that Citibank has not implemented strong data security measures to protect customers' financial accounts, exposing a clear contrast between the bank's promises of security and its actual implementation. 
 

Online banking

"Many New Yorkers rely on online banking to pay bills or save for big milestones, and if a bank cannot secure its customers' accounts, they are failing in their most basic duty," New York Attorney General Letitia James stated.
 

These allegations

Even in the face of these allegations, Citibank asserts the effectiveness of its security procedures and reimbursement strategies, emphasizing compliance with wire transfer regulations and a dedication to preventing fraud. 
 

Laws and regulations

"Citi closely follows all laws and regulations related to wire transfers and works extremely hard to prevent threats from affecting our clients and to assist them in recovering losses when possible. Banks are not required to make clients whole when those clients follow criminals' instructions, and banks can see no indication the clients are being deceived," the bank said.
 

Legal action

Nevertheless, the Attorney General's legal action contends that under the Electronic Fund Transfer Act (EFTA), banks such as Citibank are required to reimburse customers for unauthorized transactions, emphasizing a legal duty that goes beyond mere guidelines. 
 

Regulation E

The EFTA, also known as Regulation E, is a vital federal law that protects consumers from being involved in different electronic fund transfer operations. Covering activities like debit card transactions, ATM withdrawals, and direct deposits, the EFTA establishes a structure to safeguard the security and rights of individuals involved in these financial dealings.
 

Credit cards

"As with credit cards, so long as consumers promptly alert banks to unauthorized activity, the EFTA limits losses and requires reimbursement of stolen funds. These consumer protections cannot be waived or modified by contract." According to the lawsuit citing the EFTA, the unauthorized electronic withdrawals from consumers' accounts by Citi must be refunded in full. 
 

Court order

The legal action aims to obtain a permanent court order against Citibank, a detailed account of customer losses from the past six years, compensation and damages for affected consumers, and the imposition of civil penalties.
 

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