WASHINGTON (Reuters) - A U.S. financial regulator is mulling sanctions against Citigroup Inc C.N for denying minority customers the kinds of mortgage discounts that the bank offered to many other borrowers, three people familiar with the probe told Reuters.

FILE PHOTO: A Citi sign is seen at the Citigroup stall on the floor of the New York Stock Exchange, October 16, 2012. REUTERS/Brendan McDermid/File Photo

While performing a review to ensure it adhered to fair lending standards, Citigroup found that some minority borrowers were not getting the discounts they were due under a program that gives a break on mortgage rates to customers who have large deposits or wealth in the hands of the bank, said the sources.

Citigroup flagged the “relationship pricing” problems last year to its regulator, the Comptroller of the Currency (OCC), said the sources, who were granted anonymity to discuss the regulatory probe, which is not public.

The bank told the OCC that discrepancies in “relationship pricing” were inadvertent and it had taken steps to resolve the issue, they said.

Many lenders use mortgage rate discounts to deepen customer ties, but scrutiny of Citibank’s “relationship pricing’ offer could prompt questions about how other banks run such programs.

The OCC is examining whether Citigroup breached fair lending standards, which prohibit discrimination on the basis of customers’ race, gender, age or religion, the people said.

If the OCC finds wrongdoing, it could fine Citigroup or put it under tighter oversight, among other options, they said.

An OCC spokesman declined to comment on Wednesday.

In a statement provided to Reuters on Wednesday, Citigroup spokesman Drew Benson acknowledged the problems but said the bank “firmly believes it has not engaged in discrimination or violated fair lending laws.”

“In 2014, Citi self-identified errors implementing its relationship pricing program which affected a small percentage of our mortgage customers,” Benson wrote in an email. “We conducted a comprehensive review, reimbursed affected customers and have strengthened our processes and controls to help ensure correct implementation going forward.”

The OCC referred Citigroup’s findings to the Justice Department, which also enforces fair lending laws, in July 2018, according to a DOJ official who spoke on condition of anonymity. The matter was sent back to the OCC for “administrative enforcement” in recent weeks, the official said.

The Justice Department may decline referrals from other agencies if officials determine the problem has already been addressed or victims made whole.

Citigroup’s mortgage loan officers have in recent months been trained on the dangers of bias and instructed to explain the benefits of “relationship pricing” to all prospective borrowers, two employees who have been part of the training told Reuters.

Benson said recent bias workshops were voluntary and popular among employees and the “training had nothing to do with” relationship pricing.

Under the program, customers with $1 million in deposits or investments can receive a half-percentage point off their interest rates. Customers with smaller holdings are due smaller savings.

Many fair lending rules were written in the 1960s to eliminate mortgage discrimination, or ‘red-lining’.