The Consumer Financial Protection Bureau on Tuesday ordered Citibank to pay $6.5 million in client aid and penalties for pupil mortgage servicing failures.
The CFPB mentioned in a consent order that Citi erroneously canceled deferments for some debtors based mostly on inaccurate info after which incorrectly charged late charges and curiosity on the loans whereas the scholars have been nonetheless enrolled in school. After discovering that deferments had been terminated in error, Citi didn’t refund late charges and added curiosity funds to mortgage balances, the company mentioned.
“Citibank’s servicing failures made it more costly and confusing for borrowers trying to pay back their student loans,” mentioned CFPB Director Richard Cordray. “We are ordering Citibank to fix its servicing problems and provide redress to borrowers who were harmed.”
The CFPB ordered Citi to pay $three.75 million in redress to customers and a $2.75 million civil cash penalty.
In 2010, Citi offered its pupil mortgage enterprise to Discover, and the CFPB ordered Discover in 2015 to pay $18.5 million for pupil mortgage failures. However, Citi retained and continued to service a portion of its non-public pupil mortgage portfolio.
“We are pleased to resolve this matter,” mentioned Mark Costiglio, a Citi spokesman.
Earlier this yr, the CFPB warned pupil mortgage debtors to be careful for shock late charges and different fees based mostly on inaccurate details about whether or not college students have been nonetheless enrolled in school.
The CFPB mentioned Citi additionally misled debtors concerning the potential to deduct as much as $2,500 in pupil mortgage curiosity on their taxes. Citi urged on its website online and in periodic account statements that debtors weren’t eligible for the certified curiosity deduction, the CFPB mentioned.
The bureau additionally mentioned Citi overstated the minimal month-to-month fee due for some “mixed-status borrowers,” who had a number of pupil loans with Citi, a few of which have been in reimbursement whereas others have been deferred.
When some customers requested cosigner be launched and the mortgage be positioned within the borrower’s title solely, Citi made a dedication based mostly on the borrower’s credit score report and credit score rating. When Citibank denied releasing a cosigner from a mortgage, the financial institution failed to supply the borrower with all the info required beneath the Fair Credit Reporting Act, the CFPB mentioned.