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Citibank is being sued by the New York Attorney General

Hannah Locklear | April 23, 2024

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Summary: Attorney General Letitia James is suing Citibank for failing to protect customers from online fraud and refusing to reimburse victims. Citibank is accused of inadequate online security, misleading customers about their rights post fraud, and illegally denying reimbursement claims.

New York Attorney General Letitia James has sued Citibank, N.A. (Citi) for the company’s failure to safeguard customers from fraud and its refusal to reimburse victims.

In this lawsuit, Citibank is accused of not only having inadequate online protection measures to prevent unauthorized account takeovers but also of misleading its account holders regarding their rights post account breaches, and subsequently, illegally denying them reimbursement for their losses.

Sued by Citibank? Respond to defend yourself in court.

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Citibank violated federal consumer protection laws

Due to Citibank's faulty security measures, its customers have faced substantial financial losses. The bank, which holds accounts for millions across the United States, is criticized for its weak data security protocols, ineffective fraud monitoring systems, and a sluggish response to fraudulent activities. This negligence has resulted in numerous New Yorkers losing large sums of money, including life savings, children’s college funds, and essential living funds.

  • In one case, a New Yorker lost $40,000 from her retirement savings after a scam involving a deceptive text message. Despite her immediate report of suspicious activity, Citibank's inadequate response and investigation led to her claim for fraud being unjustly denied.
  • Another distressing case involved a New Yorker who lost $35,000 through a wire transfer scam, with Citibank approving the fraudulent transaction without proper verification.

The Office of the Attorney General has identified several shortcomings in Citibank's fraud response mechanisms, including:

  • Lack of response to red flags, such as login attempts from unfamiliar devices or unusual account activities.
  • Slow customer service, leaving victims on long holds during critical times and further enabling scammers to perpetuate their fraud.
  • Misinformation provided by Citi representatives about account security and the recovery of stolen funds.

Under the spotlight is Citibank's interpretation and application of the Electronic Fund Transfer Act (EFTA). The bank is accused of exploiting a narrow exception in the law to deny consumer reimbursement claims, contrary to the requirements of EFTA which mandates that banks must reimburse customers for losses due to unauthorized electronic transactions.

The attorney general aims to protect consumers

This lawsuit is a part of Attorney General James' broader effort to hold financial institutions accountable. Recently, she led a coalition of attorneys general urging federal agencies to ensure national banks' cooperation in state-led investigations. Additionally, she called upon major banks to abolish overdraft fees on consumer accounts.

Through this legal action, Attorney General James seeks restitution for defrauded consumers, imposing penalties on Citibank, and demanding the implementation of stronger anti-fraud measures.

Consumers who have suffered fraud or identity theft through online or mobile banking should report their experiences to the FTC’s Bureau of Consumer Protection.

Citibank lawsuit explained

Here are the main points from the Citibank lawsuit against New Attorney General:

  • Allegations of Inadequate Protection: The lawsuit alleges that Citibank failed to protect its consumers from sophisticated online and mobile banking scams like phishing and SIM swaps. This lack of protection led to unauthorized access and theft of consumer funds.
  • Violation of EFTA Regulations: Citibank is accused of not complying with the Electronic Fund Transfer Act (EFTA) which requires banks to reimburse consumers for unauthorized transactions. The bank allegedly did not implement sufficient security measures and was ineffective in reacting to fraud alerts, often misleading consumers and unjustly denying their reimbursement claims.
  • Mishandling of Consumer Reports: The complaint details how Citibank encourages the execution of affidavits, shifting focus away from EFTA protections, and utilizes inadequate security procedures, resulting in financial losses and distress for consumers.
  • Violation of EFTA and UCC: The lawsuit contends that Citibank applies the Uniform Commercial Code (UCC) instead of the EFTA to consumer claims for fraudulent wire transfers and unauthorized EFTs. This approach is criticized for neglecting robust verification processes and failing to consider signs of fraud.
  • SHIELD Act and Red Flag Rule Violations: Citibank is further accused of failing to meet the requirements of New York’s SHIELD Act and the Red Flag Rule, which mandate the protection of private information and establishment of an identity theft prevention program.
  • Deceptive Practices: The lawsuit also alleges that Citibank engaged in fraudulent and deceptive practices in its account administration, misleading consumers about the security of online and mobile banking, and failing to adequately safeguard accounts against unauthorized access.
  • Seeking Restitution and Injunctions: The complaint seeks an order for injunction, restitution, disgorgement of profits, civil penalties, and other relief against Citibank to prevent further illegal and deceptive conduct.

This lawsuit underscores the vital importance of robust online security measures in banking and highlights the consequences of failing to protect consumers in the digital age.

These laws aren’t the only ones violated by Citibank. Many consumers report violations of debt collection laws when dealing with Citibank. If you’ve been sued by Citibank for a debt owed, you should learn about your consumer rights so you can know the best defense in your case.

Citibank has a history of violating the FDCPA

The Fair Debt Collection Practices Act (FDCPA) is another federal law that protects consumers from deceptive collection practices and harassment. The Consumer Financial Protection Bureau’s consumer complaint database reports nearly 95,000 complaints against Citibank, 7,000+ of which mention issues with the bank’s collections department.

Under the FDCPA, Citibank cannot:

  • Call you before 8 a.m. or after 9 p.m.
  • Call you at work when your employer prohibits such communication
  • Tell your family or friends that you owe a debt
  • Continue to contact you when you have explicitly asked them not to
  • Take actions considered harassment or abuse under the FDCPA
  • Claim they will sell your debt in order to coerce you to pay
  • Cause your phone to ring repeatedly with the intent to annoy
  • Fail to disclose that they are a debt collector
  • Make false claims about who they are
  • Threaten to seize your house or other property
  • Threaten to take legal action that they cannot, or do not plan to, take

If you’ve experienced any of these debt collection methods when dealing with Citibank debt collectors, you may have legal grounds to sue and receive compensation. Protect your rights and file a complaint with the FTC.

Settle debt with Citibank

To resolve debt with Citibank, consider debt settlement. We asked an attorney for some tips on how to negotiate with Citibank, and here’s what we learned:

  • Avoid threatening bankruptcy if you don't mean it, as this empty threat is often ineffective.
  • Paint a picture of your financial hardship to the creditors or their lawyers.
  • Show proof of your limited ability to pay, like being on Social Security, facing multiple debts, or having wage garnishments.
  • Make a realistic offer, considering they will likely counteroffer.
  • For junk debt buyers, settlements of 10-35% of the total debt are typical, while original creditors may accept 50-75%.
  • If you propose a payment plan, ensure it's realistic for your budget.
  • Be truthful about your financial situation, as creditors often have detailed information about you.

Watch the video below for the full interview with debt lawyer, John Skiba:

Respond to a Citibank lawsuit

If you're facing a lawsuit from Citibank, follow these three steps to respond:

  1. Respond to Each Allegation: Your response, known as the 'Answer', should directly address each claim Citibank makes in their Complaint. For every allegation, you have the option to admit, deny, or deny due to lack of knowledge. It's often advised to deny as many claims as feasible, forcing Citibank to substantiate their case thoroughly.

  2. Assert Affirmative Defenses: An affirmative defense is any legal grounds that could argue against Citibank's case winning, such as the statute of limitations. There are many defenses that could bolster your position and strengthen your case.

  3. File and Send Your Answer: After preparing your Answer, file it with the court and send a copy to Citibank's legal team. Use certified mail with a return receipt for proof of delivery. Be aware of the deadline to submit your Answer, which varies from 14 to 35 days based on your state.

Check out our guide on how to settle debt with Citibank to learn more about how to respond to a Citibank lawsuit, settle outside of court, and save money.

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