The Consumer Financial Protection Bureau has ordered Citibank to pay a total of $6.5 million for misleading student-loan practices and to change its student loan servicing practices.
The $6.5 million charge is divided between $3.75 million as redress to borrowers who were misled and $2.75 million as a fine paid to the government.
The CFPB charged Citibank with misleading borrowers into believing they weren’t eligible for a tax deduction on interest paid on certain loans when they were, and with incorrectly charging late fees and added interest to loan balances of borrowers still in school and eligible for payment deferral.
In addition, the CFPB charged Citibank with overstating the minimum monthly payments due from borrowers with multiple loans and with failing to disclose the reasons it denied the release of co-signers from loans in violation of the Fair Credit Reporting Act.
All the charges apply to private student loans that Citibank services. The bank unloaded most of its student loan business to Discover in 2010, which was subsequently charged by the CFPB with many of the same charges leveled at Citibank on Tuesday. The action against Discover in 2015 was the agency’s first involving student loan servicing practices and involved $18.5 million in charges.
Since then, the CFPB has charged Wells Fargo, National Collegiate Student Loan Trust and Navient, the largest student loan servicer, with multiple violations. A recent agency report found that the CFPB has fielded tens of thousands of complaints from student loan borrowers over the past six years and has provided $750 million worth of relief. Student loan complaints over the 12 months ended August 31 more than doubled, according to the report.
The agency also previously joined with the Department of Education to seek millions of dollars in relief from for-profit Corinthian Colleges and the ITT Technical Institute for predatory loan practices. The DOE under its current Secretary Betsy DeVos, however, has failed to chancel those loans, according to Sens. Elizabeth Warren (D-Massachusetts), Dick Durbin (D-Illinois) and 14 Senate colleagues who issued a report last week about the DOE’s inaction and sent it to the Secretary.
Attorneys general from 17 states and the District of Columbia on Tuesday are suing DeVos for a DOE decision to delay and decline to enforce part of the Gainful Employment Rule, which requires for-profit and other educational institutions that rely upon federal aid for the most of their revenue to show that their programs prepare students to find employment that will provide them the ability to repay their loans.