Consumer Finance watchdog CPFB clamps down on CitiBank’s illegal student loan servicing practices

The Consumer Finance Protection Bureau (CFPB) has asked CitiBank to pay up to $6.5 million in refunds and fines for illegal student loan servicing practices.

According to a news article on the CFPB’s website, bureau director Richard Cordray said:

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

The key areas addressed by the CFPB are as follows:

  • Misleading borrowers about tax-deduction benefits

  • Incorrect charges for late fees and interest on loan balances for students still studying

  • Overstating minimum dues on monthly statements

  • Failure to disclose information after denying the release of cosigners

The CFPB has ordered CitiBank to pay $3.75 million in consumer refunds and another $2.75 million towards the CFPB’s Civil Penalty Fund. In addition, CitiBank is required to rectify its illegal and incorrect practices while servicing student loans.

A copy of the consent order has been made available here (PDF document.)

+++ + +++