Dive Brief:

• Citi asked a federal judge Tuesday to dismiss New York Attorney General Letitia James’ lawsuit against the bank, saying the suit targets the wrong law.
• James’ lawsuit, filed in January, alleges that Citi fails to protect customers that fall victim to scams and refuses to reimburse victims as required by the Electronic Fund Transfer Act.
• Citi argued Tuesday that the EFTA doesn’t apply to wire transfers — which, rather, fall under Article 4A of the Uniform Commercial Code. That legislation, Citi said, excuses banks from covering losses if they adopt commercially reasonable security measures in good faith to verify customers’ identities.

Dive Insight:

In a court filing Tuesday, Citi called James’ suit a “misguided attempt” to modify the EFTA by adding consumer protections.

“The proper forum for pursuing the goals NYAG seeks to achieve in this litigation is in Congress, not a courtroom,” Citi argued Tuesday, according to Bloomberg.

James’ assertion that banks are liable for wire transfers is an “imaginative theory,” but it “defies long-standing, settled understandings,” Citi said, according to American Banker.

The attorney general’s lawsuit would "abruptly and dramatically upset how banks have organized their policies and practices for decades," Citi argued, according to Reuters.

James’ lawsuit claims Citi’s systems fail to effectively flag actions that occur on unrecognized devices, or involve changes to user names and passwords. The suit also alleges Citi persuades scam victims to sign affidavits that reduce their ability to be reimbursed, then it rejects customers’ fraud claims altogether.

Citi said Tuesday it has adopted “robust countermeasures” to fight fraud.

“Citibank devotes substantial resources to combating online fraud and to protecting its customers, and will continue to do so,” the bank said in its filing, according to Bloomberg. “Citibank’s significant anti-fraud practices have stopped countless fraudulent transactions and protect consumers from scammers every day.”

James wants a judge to order Citi to document all denied customer claims from the past six years that were tied to unauthorized payment orders and debit authorizations. She also wants the bank to reimburse victims, pay a $5,000 fine for each instance in which it violated the law and adopt enhanced anti-fraud defenses.

Citi, however, asserted Tuesday that “no system will catch every scam every time.

James’ interpretation of the law “would bring about — via litigation, not legislation — a sea change in banking law,” Citi argued Tuesday, according to American Banker, adding that Congress made a “deliberate choice” to keep consumer wire transfers out of the EFTA.