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CFPB Penalizes Citibank for Student Loan Servicing Failures
Monday, November 27, 2017 6:50 AM

The Consumer Financial Protection Bureau has taken action against Citibank, N.A. for student loan servicing failures that harmed borrowers.

“Citibank’s servicing failures made it more costly and confusing for borrowers trying to pay back their student loans,” said CFPB Director Richard Cordray. “We are ordering Citibank to fix its servicing problems and provide redress to borrowers who were harmed.”

CFPB says Citibank misled borrowers into believing they were not eligible for a valuable tax deduction on interest paid on certain student loans. The company also incorrectly charged late fees and added interest to the student loan balances of borrowers who were still in school and eligible to defer their loan payments. Citibank also misled consumers about how much they had to pay in their monthly bills and failed to disclose required information after denying borrowers’ requests to release loan cosigners. The Bureau is ordering Citibank to end these illegal servicing practices, and to pay $3.75 million in redress to consumers and a $2.75 million civil money penalty.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Bureau has the authority to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices. The CFPB’s order requires Citibank to:

  • Refund $3.75 million to harmed consumers: The Bureau’s order requires Citibank to pay $3.75 million in restitution to harmed consumers who were charged erroneous interest or late fees, paid an overstated minimum monthly payment, or received inadequate notices as a result of Citibank’s faulty servicing.
  • Make changes to their servicing practices: The Bureau’s order requires Citibank to provide accurate information regarding student loan interest paid, implement a policy to reverse erroneously assessed interest or late fees, and to provide borrowers who were denied a cosigner release with their credit scores, the phone number of the credit reporting agency that generated the credit report, and disclosure language confirming that the credit reporting agency did not make the decline decision.
  • Pay a $2.75 million fine: The Bureau’s order requires Citibank to pay a $2.75 million penalty to the CFPB’s Civil Penalty Fund.

View the Bureau’s consent order.

The CFPB previously addressed many of these issues in a related 2015 enforcement action against Discover for servicing practices related to the loans it acquired from Citibank beginning in late 2010. This new enforcement action applies to the private student loans that Citibank retained, and continued to service, after that period.

Earlier this year the Bureau issued a consumer advisory warning student loan borrowers to watch out for similar servicing errors driven by faulty information about whether a borrower was enrolled in school. This advisory highlighted complaints from consumers about surprise late fees and other charges driven by inaccurate college enrollment information. 

View the Bureau’s consumer advisory.