In 2007 Marsha and Michael Shames-Yeakel fell victim to an ID thief who gained access to their Citizens Financial Bank online account and stole $26,500 from a home equity credit line.

The money was transferred, via a bank in Hawaii, to a financial institution in Austria. The Austrian bank refused to return the funds, prompting Citizens to inform the couple that they would be liable for the loss.

The Shames-Yeakel's refused to pay, leading the bank to report their account as delinquent to the national credit bureaus and threaten to foreclose on their residence.

In response, the couple sued the bank on several grounds, claiming violations of the Electronic Funds Transfer Act and the Fair Credit Reporting Act, in the northern district of Illinois.

They also accused the bank of negligence under state law for failing to adequately protect their online accounts. The plaintiffs claim that by only requiring user names and passwords to authenticate customers at log in, Citizens failed to maintain state-of-the-art security standards.

At the time of the theft, the bank was actually rolling out one-time-password generating tokens to provide two-factor authentication but the couple say it was too slow on the uptake.

The Shames-Yeakels cite a 2005 document entitled "Authentication in an Internet Banking Environment" from the Federal Financial Institutions Examination Council (FFIEC), which says single-factor authentication is inadequate and calls on banks to implement two-factor systems.

Citizens says its security measures were not the cause of the theft and says fintech vendor Fiserv, which it contracts for online banking services, including information security, has a strong reputation.

However, now, US District Judge Rebecca Pallmeyer has denied Citizens' request to dismiss the negligence claim, concluding: "In light of Citizens' apparent delay in complying with FFIEC security standards, a reasonable finder of fact could conclude that the bank breached its duty to protect Plaintiffs' account against fraudulent access."

The Judge also states: "If this duty not to disclose customer information is to have any weight in the age of online banking, then banks must certainly employ sufficient security measures to protect their customers' online accounts."

Legal blogger David Johnson, who first reported the case, warns that "state and federal legislatures and regulators, as well as courts around the country, are increasingly unwilling to let businesses slack off from the cyber-security arms race".