Citibank was ordered by the Consumer Financial Protection Bureau to pay $3.75 million in redress and a $2.75 million fine over student loan servicing failure allegations.
The CFPB said Nov. 21 the bank deceived borrowers about tax benefits, misleading them into believing that they were not eligible for a tax deduction on interest paid on certain student loans.
Citibank 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, the CFPB said.
Furthermore, the bank 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 CFPB alleged.
Fix the Problem
Under the terms of the settlement, the bank neither admitted nor denied the allegations. A spokesman said Citi was pleased to resolve the matter.
“Citibank’s servicing failures made it more costly and confusing for borrowers trying to pay back their student loans,” CFPB Director Richard Cordray said in a news release. “We are ordering Citibank to fix its servicing problems and provide redress to borrowers who were harmed.”
The bureau brought the Citibank enforcement action under its Dodd-Frank Act authority to prevent unfair, deceptive, or abusive acts or practices (UDAAP). Republicans in Congress have sought to take away the CFPB’s UDAAP powers, which has been used in more than two-thirds of the agency’s settlements, according to Bloomberg Law’s CFPB Enforcement Tracker.
Cordray recently announced plans to leave the CFPB by Nov. 30. Bloomberg News has reported that the Trump administration is considering Office of Management and Budget Director Mike Mulvaney for a temporary role as interim director.