Judge Rules New York Lawsuit Against Citibank Can Proceed

Citibank will have to face a New York state lawsuit alleging that it failed to protect and reimburse victims of fraud.

A federal judge rejected the bank’s request to dismiss the lawsuit, Reuters reported Tuesday (Jan. 21).

Citibank had argued that the law under which it is being charged expressly excluded wire transfers, according to the report. However, the judge ruled that was not the case.

New York Attorney General Letitia James said in a Tuesday press release that the court found that the Electronic Fund Transfer Act (EFTA) applied to unauthorized wire transfers made through Citibank’s consumer accounts.

“When New Yorkers deposit their money in a bank, they expect it to be kept safe from scammers and thieves,” James said in the release. “Citi’s failures to protect its customers’ accounts are costing New Yorkers millions of dollars. Today’s decision will allow us to continue our case against Citi to help those whose savings were stolen and ensure the bank follows the law to protect its customers.”

Reached by PYMNTS, Citibank said in an emailed statement: “We are disappointed in this decision, as the industry-standard practices we employ have long been recognized as satisfying applicable law. We are therefore evaluating next steps in the litigation.”

When New York filed the lawsuit in January 2024, James alleged that Citibank had no protections against account takeovers, misled customers about their rights when their accounts were hacked and unlawfully denied fraud victims reimbursements.

The suit alleged that because Citi made wire transfers available to consumers online and through mobile banking apps, it must reimburse victims of fraud under the EFTA.

In a statement provided to PYMNTS at the time the lawsuit was filed, a Citi spokesperson said the bank follows all laws and regulations related to wire transfers, works to prevent fraud, and assists clients 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 statement said. “However, given the industry-wide surge in wire fraud during the last several years, we’ve taken proactive steps to safeguard our clients’ accounts with leading security protocols, intuitive fraud prevention tools, clear insights about the latest scams, and driving client awareness and education.”