Charging Citibank, N.A., with deceiving student borrowers about tax benefits, incorrectly charging late fees and interest, and sending misleading monthly bills and incomplete notices, the Consumer Financial Protection Bureau has ordered the bank to end its allegedly illegal servicing practices and pay $3.75 million in redress to consumers and a $2.75 million civil money penalty. Citibank consented to the order without admitting or denying the Bureau’s findings.
"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."
Loan servicing. For years, Citibank, based in Sioux Falls, S.D., has made private student loans to consumers and also serviced the loans. As a loan servicer, Citibank manages and collects payments and provides customer service for borrowers. The bank also provides borrowers with periodic account statements and supplies year-end tax information. It also keeps track of the borrower’s in-school enrollment status and is responsible for granting and maintaining deferments when appropriate.
For the student loan accounts that Citibank was servicing, the Bureau found that Citibank misrepresented important information on borrowers’ eligibility for a valuable tax deduction, failed to refund interest and late fees it erroneously charged, overstated monthly minimum payment amounts in monthly bills, and sent faulty notices after denying borrowers’ requests to release a loan cosigner.
The Dodd-Frank Act grants authority to the CFPB to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices.
Restitution. The CFPB’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;
- provide accurate information regarding student loan interest paid, implement a policy to reverse erroneously assessed interest or late fees, and 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; and
- pay a $2.75 million penalty to the CFPB’s Civil Penalty Fund.
Companies: Citibank, N.A.
MainStory: TopStory BankingOperations CFPB DoddFrankAct EnforcementActions Loans UDAAP
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