Citibank Subject Of Privacy Lawsuit

Talk about your rough weeks. Tuesday, an internal software glitch knocked out all 2,000 ATM machines run by Citigroup Inc. subsidiary Citibank for at least 19 hours and kept other transaction networks out of service even longer. Thursday afternoon, just when the company had recovered from the software problem, its credit-card division was slapped with a class-action privacy lawsuit filed in South Dakota by Seattle law firm Cohen, Milstein, Hausfeld & Toll.

The suit claims the company unlawfully disclosed to telemarketers and vendors private financial information about customer accounts. It also alleges that because of the information leak, telemarketers had access to private account information that would allow them to charge credit-card accounts without authorization.

The complaint officially charges Citibank and Citigroup with breach of contract, violations of South Dakota's Deceptive Trade Practices Act, and violations of the common law duty of banking confidentiality. The complaint seeks an order enjoining Citibank and Citigroup from disclosing cardholders' account information and awarding compensatory damages to class members.

This isn't the first such action to be taken against a financial-services institution, but it's unusual in that the suit is being filed by a private firm on behalf of angered citizens rather than by a local attorney general. That's been the practice in Minnesota, where the attorney general has filed privacy suits against U.S. Bank and FleetBoston's Mortgage subsidiary. "Privacy has been on everyone's radar screen, and we're trying to create another element of awareness," says Keelyn Friesen, an attorney at Cohen, Milstein, Hausfeld & Toll. "This is also unique in that it is asking a credit card to cease in disclosing consumer information."

Citibank officials could not be reached by press time for comment.