Citibank investigated over student loan servicing

August 04 02:30 2015

Citibank is under investigation for its student loan-servicing practices, the New York-based bank disclosed Monday. The bank said it’s cooperating with the investigation, but warned that regulators may order it to provide financial relief to customers and could decide to impose additional financial penalties.1401907823000-AP-SEC-Citigroup

Citibank shares were down 0.43% at $58.21 in morning trading following the disclosure. The bank’s disclosure of the investigation in a Securities and Exchange Commission filing did not identify the regulator. However, the bank said similar student loan-servicing practices have been the subject of an enforcement action against at least one other financial institution.

The U.S. Consumer Financial Protection Bureau announced in July that Discover Bank and two affiliates would pay $18.5 million in consumer refunds and fines for using illegal practices while servicing private student loans. The Illinois-based depository institution overstated the minimum amounts due on billing statements, failed to provide information borrowers needed to obtain federal income tax benefits and used illegal debt-collection practices by calling borrowers early in the morning and late at night, the CFPB said.

Discover declined to comment on the legal consent order filed by the regulator and neither admitted nor denied the findings. The CFPB sought public comment about student loan servicing earlier this year, saying the survey results would be used “to assist market participants and policymakers on potential options to improve borrower service, reduce defaults, develop best practices, assess consumer protections, and spur innovation.” More than 8 million borrowers were in default on more than $110 billion in student loans, a problem that may be complicated by complaints related to loan servicing, the CFPB said in a report earlier this year.

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