Dive Brief:

  • The Consumer Financial Protection Bureau on Wednesday fined Citi $25.9 million over allegations the bank intentionally discriminated against credit card applicants the bank identified as Armenian-American.
  • From 2015 through 2021, the bank denied applicants certain credit card products based on their surnames, whom the firm suspected of being of Armenian descent, according to the CFPB
  • The regulator said Citi supervisors tried to cover up the discrimination by instructing employees not to discuss the practices in writing or on recorded phone lines. Citi employees also lied about the basis of denial, providing false reasons to denied applicants, the CFPB said.

Dive Insight:

Under the order, Citi will pay $1.4 million to harmed consumers along with a $24.5 million penalty.

“Citi purposefully discriminated against applicants of Armenian descent, primarily based on the spelling of their last name,” CFPB Director Rohit Chopra said in a statement Wednesday. “Citi stereotyped Armenians as prone to crime and fraud. In reality, Citi illegally fabricated documents to cover up its discrimination.”

The CFPB said the misconduct was limited to the bank’s retail-services division, which provides co-branded credit cards for companies like Home Depot, Macy’s and Best Buy.

The bank specifically targeted retail services credit card applicants with surnames ending in “ian” and “yan,” suffixes that Citi employees associated with Armenian national origin, the CFPB said. The firm also targeted applicants in or around Glendale, California, home to approximately 15% of the U.S.’s Armenian-American population, the CFPB added.

“Our investigation uncovered that applicants of Armenian descent could fully meet the criteria for getting approved, and in order to send them the required notice, Citi lied to the borrowers and fabricated the reasons for the denial,” Chopra said on a call with reporters Wednesday. “To further cover its tracks, Citi made it appear that denials were the fault of the applicant.”

The bureau, to date, has identified “hundreds of individuals” who were harmed by the practice, Eric Halperin, the CFPB’s assistant director for enforcement, said on the call.

“The efforts of Citi to cover up the conduct are extremely serious, and that’s why it merited such significant penalties relative to the redress,” Halperin said.

Citi agreed to the stipulations of the order, but has neither admitted or denied the allegations, Halperin said.

“Regrettably, in trying to thwart a well-documented Armenian fraud ring operating in certain parts of California, a few employees took impermissible actions,” Citi said in an emailed statement to Banking Dive. “While we prioritize protecting our bank and our customers from fraud, it is unacceptable to base credit decisions on national origin.

“We sincerely apologize to any applicant who was evaluated unfairly by the small number of employees who circumvented our fraud detection protocols,” the statement continued. “Following an internal investigation, we have taken appropriate actions with those directly involved in this matter, and we promptly put in place measures to prevent any recurrence of such conduct.”

Halperin did not comment on whether the CFPB had identified similar practices at other financial institutions, but said the bureau is “concerned that entities’ efforts to address fraud has resulted in unlawful conduct.”

Prohibiting unlawful discrimination and fostering fair lending is a priority for the bureau, Halperin said. “One of the core purposes of the fair lending laws is to make sure that lenders and creditors are making decisions based on legitimate creditworthiness of the borrowers and not substituting stereotypes and assumptions about individuals based on their race or their national origin, which is exactly what happened in this case,” he said.

‘Long-standing problems’

During Wednesday’s call with reporters, Chopra listed Citi’s past consumer abuses, adding he is concerned with the bank’s “long-standing problems when it comes to managing its sprawling lines of business.”

In 2018, Citi paid $335 million in restitution over claims it violated the Truth in Lending Act on its credit card. The firm was fined $6.5 million in 2017 for allegedly deceiving student loan borrowers. 

In 2016, Citi paid more than $7.5 million in fines for alleged illegal debt sales and collection practices. And in 2015, the firm was fined nearly $750 million over claims it engaged in illegal practices related to its credit card add-on products.

Wednesday’s consent order comes as the bank is undergoing a major reorganization aimed at reining in expenses and improving the firm’s stock price. The bank is also considering trimming its headcount in several major units by at least 10% as part of the corporate overhaul, CNBC reported Monday.


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