The Consumer Financial Protection Bureau (CFPB) ordered Citibank to pay up to $3.75 million to student loan borrowers who were allegedly affected by misleading servicing. The CFPB also levied a $2.75 million fine, totaling $6.5 million in fines.
The CFPB levied theses fines on the basis of two claims. First, it believes Citi misinformed its student borrowers about interest tax deduction eligibility, costing borrowers. Second, Citi incorrectly charged interest and late payment fees, costing borrowers who were in school and eligible for deferment.
The Consumer Financial Protection Bureau released a condemning consent order dealing with the multiple infractions of Citibank with its student loan borrowers. As noted by Richard Cordray, the consumer bureau’s director, “Citibank’s servicing failures made it more costly and confusing for borrowers trying to pay back their student loans.”
For those affected it should be noted that according to the consent order, Citibank has 90 days to formulate a plan on how to best contact and send funds to affected student borrowers who were affected by their actions.
So what does this mean for the average consumer? Well for those with student loans serviced by Citibank, you might be in for a bit of a payday due to the bank’s inability to adhere to federal policies. There is no word on how much compensation or credits that an individual may receive.
This is yet another action taken this year by the consumer watchdog.
Back in January, the CFPB hit Navient with a lawsuit about misleading student loan borrowers; however, the allegations were met with resistance. Furthermore, the CFPB sought debt relief for student borrowers back in August. However, there are some critics who would rather see the CFPB lay off the oversight.
During the fourth quarter, the CFPB has been in murky water with questions arising about its future leadership. Richard Cordray recently announced his intentions to step down from his position as Director. The move is effective at the start of December.
Author: Andrew Rombach
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