Citigroup employees labeled a group of roughly 80,000 Armenian-Americans living near Los Angeles — the largest Armenian community outside Yerevan, the Armenian capital — as “bad guys” and secretly denied them fair access to the bank’s credit card products, the Consumer Financial Protection Bureau said in a statement on Wednesday.

The bank has agreed to pay $25.9 million to settle a case brought by the consumer bureau under the Equal Credit Opportunity Act, the federal law that prohibits banks from discriminating against people based on a host of qualities, including race, national origin and religion. Of the total, $1.4 million will go to the victims of Citigroup’s discriminatory practices, the regulator said. The other $24.5 million is a penalty for the bank’s misconduct.

“Citi stereotyped Armenians as prone to crime and fraud,” Rohit Chopra, the director of the consumer bureau, said in a news conference on Wednesday. “In reality, Citi illegally fabricated documents to cover up its discrimination.”

Mr. Chopra said that Citigroup had been caught violating bank regulations on several occasions. The consumer regulator said Citigroup’s discriminatory practices regarding Armenians were in place from at least 2015 to 2021. “I am concerned about Citi’s longstanding problems when it comes to managing the many parts of its sprawling business,” Mr. Chopra said.

According to the regulator, Citi employees pegged the community, in Glendale, Calif., as a group whose members were likely to rack up huge debts and then flee the country. They warned new hires not to give credit card applicants with Armenian-sounding last names that ended in “ian” or “yan” the same rates that other customers received, and in some cases urged them to reject these applicants altogether.

The people affected by the bank’s practice were not applying for Citigroup-branded cards; they were seeking cards offered by retailers, like Home Depot and Best Buy, that were underwritten by the bank. Eric Halperin, the consumer bureau’s enforcement director, said during the news conference that Citigroup was still trying to identify how many people were affected by the discrimination, but so far regulators had identified “hundreds.”

Karen Kearns, a spokeswoman for Citigroup, said in a statement that the bank had been “trying to thwart a well-documented Armenian fraud ring operating in certain parts of California,” and that “a few employees took impermissible actions.”

According to regulators, Citi managers knew excluding Armenians was illegal and warned employees “not to discuss it in writing or on recorded phone lines.” Even so, regulators found evidence of Citi employees discussing over email how to cover up their denial of applicants from Glendale.

“It’s been a while since I declined for possible credit abuse/YAN — gimme some reasons I can use,” one employee wrote to another in 2016, seeking advice on how to tell a potential customer that a credit card application had been denied without revealing the real reason, according to the consumer bureau.

“We sincerely apologize to any applicant who was evaluated unfairly,” Ms. Kearns said. “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.”