The Consumer Financial Protection Bureau (CFPB) has terminated a consent order that required Citibank to pay a $25 million settlement over allegations of credit discrimination. The original action accused the bank of systematically discriminating against credit card applicants of Armenian descent for several years.
The decision to end the enforcement action has drawn sharp criticism from Senator Adam Schiff, who accused the regulatory agency of providing a "free pass" to the financial institution and failing to protect consumers from discriminatory practices.
Key Takeaways
- The Consumer Financial Protection Bureau (CFPB) has officially terminated a settlement order against Citibank.
- The order related to allegations that Citibank illegally discriminated against credit card applicants with Armenian surnames from 2015 to 2021.
- Citibank was originally required to pay a $25 million penalty for the alleged discriminatory conduct.
- Senator Adam Schiff strongly condemned the termination, stating it prioritizes a large corporation over wronged consumers.
Background of the Discrimination Allegations
The case against Citibank originated from a 2023 CFPB investigation. The agency found that from at least 2015 through 2021, Citibank engaged in practices that illegally targeted credit card applicants based on their perceived Armenian national origin.
According to the CFPB's findings, the bank implemented a policy where applications from individuals with last names common among people of Armenian descent were flagged for special review. These applications were then subjected to heightened scrutiny that was not applied to other applicants.
A System of Targeted Review
The CFPB alleged that Citibank created a special unit specifically to handle these flagged applications. Employees in this unit were reportedly instructed to apply discriminatory scrutiny, leading to a higher rate of denials for qualified applicants.
The bank was accused of inventing false reasons for rejecting these applications. In some cases, individuals were referred to fraud prevention units solely because their surname appeared to be Armenian. The CFPB's initial announcement in 2023 stated, “Citi treated Armenian Americans as criminals who were likely to commit fraud.”
Class-Action Lawsuit Still Pending
Separate from the CFPB's action, a class-action lawsuit was filed against Citibank in federal court in November 2023. The lawsuit makes similar allegations, claiming the bank's secret policy led to rejected applications, denied credit line increases, and the cancellation of accounts in good standing for nearly a decade based on perceived national origin.
Investigators also found that Citibank employees were trained not to document the discriminatory policy in writing or discuss it on recorded phone calls, suggesting an attempt to conceal the practice.
Senator Schiff Condemns Termination of Order
Following the CFPB's decision to terminate the settlement, Senator Adam Schiff of California issued a strong rebuke. He characterized the move as a failure to hold a major financial institution accountable for clear discriminatory behavior.
“For years, Citibank intentionally singled out Armenian Americans, subjecting them to illegal discrimination on the basis of their national origin. They turned away customers, denied credit card applications, and engaged in openly discriminatory practices on the basis of an applicant’s surname,” Schiff said in a public statement.
The senator argued that the decision undermines the core mission of the CFPB, which was established to protect consumers from unlawful practices by financial companies.
Details of the Original Settlement
The now-terminated consent order would have required Citibank to pay a $25 million civil penalty. The funds were intended to serve as restitution for the victims of the alleged discrimination and as a deterrent against future misconduct by the bank and others in the industry.
Accusations of Siding with Corporations
Schiff accused the current administration of dismantling consumer protections and prioritizing corporate interests. He specifically criticized the decision to cancel the financial restitution that victims were set to receive.
“Once again, this administration is putting big corporations ahead of the people. It has terminated the restitution these victims were granted and sent a clear message to the Armenian American community that Citibank is more important than the financial success of its customers,” he added.
The senator described the move as a choice “to take the side of the bank against the wronged in the face of the most plainly discriminatory conduct,” warning it would “cast a long shadow over the community.”
Implications for Consumer Protection
The termination of the Citibank order raises questions about the direction of financial regulation and consumer protection. Critics like Senator Schiff see it as part of a broader trend of weakening the CFPB, an agency he described as “the very agency Congress created to be a cop on the beat of Wall Street banks.”
The Equal Credit Opportunity Act is a federal law that explicitly prohibits creditors from discriminating against applicants on the basis of national origin, race, color, religion, sex, marital status, or age. The allegations against Citibank represent a direct violation of this core consumer protection law.
- Alleged Practice: Flagging applications based on Armenian-sounding surnames.
- Duration: At least 2015 to 2021.
- Consequences for Applicants: Denied credit cards, rejected credit line increases, and account cancellations.
- Regulatory Action: A $25 million settlement was reached and subsequently terminated.
Senator Schiff has previously sought further accountability from the bank. He sent a letter to the Acting Comptroller of the Currency, Michael J. Hsu, urging a separate investigation into Citibank's practices. He concluded his recent statement by vowing to continue his support for the Armenian community.
“I will continue to stand with the Armenian people to ensure banks and financial services institutions do not engage in discriminatory practices that obstruct individuals’ access to economic opportunity,” the senator emphasized.
