By Jonathan Stempel and Tatiana Bautzer
NEW YORK (Reuters) -Citigroup Inc has agreed to pay $25.9 million to settle U.S. Consumer Financial Protection Bureau (CFPB) charges it intentionally discriminated against credit card applicants who the bank identified as Armenian-American based on their last names.
The regulator said on Wednesday that from 2015 to 2021, Citigroup managers trained employees to stereotype applicants suspected of being of Armenian descent because their last names ended in “ian” and “yan,” believing them likely to commit fraud.
Many victims were in Glendale, California, which is sometimes nicknamed “Little Armenia” and is home to about 15% of the Armenian-American population in the United States.
Citigroup, which has software to screen card applications for fraud, was accused of applying more stringent criteria when evaluating victims’ applications, including by requiring additional information or denying applications altogether.
The CFPB also said bank employees lied to applicants by giving them fake reasons for denials, and were instructed not to discuss the discrimination in writing or over the phone.
According to a consent order, some employees referred to card applicants they suspected were of Armenian descent as “Armenian bad guys” or the “Southern California Armenian Mafia.”
The payment includes a $24.5 million civil fine and $1.4 million of restitution to card applicants, for violations of the federal Equal Credit Opportunity Act.
Citigroup apologized, saying it had been trying to thwart an Armenian fraud ring in California but that a “small number” of employees circumvented its fraud detection protocols. It said it has disciplined people who were directly involved.
“While we prioritize protecting our bank and our customers from fraud, it is unacceptable to base credit decisions on national origin,” the New York-based bank said in a statement.
CFPB Director Rohit Chopra told reporters on Wednesday that Citigroup was a repeat violator of consumer protection laws, having paid more than $1 billion in fines and consumer redress since 2015.
“I am concerned with Citi’s longstanding problems when it comes to managing sprawling lines of business,” he said.
Chopra and other Biden administration officials have in recent years signaled their intent to punish recidivist corporate offenders.
(Reporting by Jonathan Stempel and Tatiana Bautzer in New York and Douglas Gillison in Washington; Editing by Chizu Nomiyama and Mark Potter)