Citibank, N.A. – CFPB Takes Action Against Citibank

CFPB Takes Action Against Citibank, N.A. For Student Loan Servicing Failures That Harmed Borrowers

Action Against Citibank, N.A. For Deceiving Borrowers About Tax Benefits, Incorrectly Charging Late Fees and Interest, Sending Misleading Monthly Bills and Incomplete Notices

On November 21, 2017, the Consumer Financial Protection Bureau (“CFPB”) announced that the CFPB

. . . took action against Citibank, N.A. for student loan servicing failures that harmed borrowers. Citibank misled borrowers into believing that they were not eligible for a valuable tax deduction on interest paid on certain student loans. The company also 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. Citibank also 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] is ordering Citibank to end these illegal servicing practices, and to pay $3.75 million in redress to consumers and a $2.75 million civil money penalty.

The CFPB found that “[f]or the student loan accounts that Citibank was servicing . . . 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.”

Specifically, the CFPB found that Citibank:

Misled borrowers about their tax-deduction benefits: Federal law allows some borrowers to deduct up to $2,500 in student loan interest paid on “qualified education loans” annually. On its website and periodic account statements, Citibank made statements that suggested borrowers had not paid qualified interest, or that the borrowers were not eligible for the qualified interest tax deduction. Consequently, borrowers did not seek this tax benefit, even though they may have been able to benefit from it.

Incorrectly charged late fees and interest on loan balances to students still in school: Current students are eligible for in-school deferments, which postpone repayment until six months after they are no longer enrolled in school. Citibank erroneously canceled in-school deferments for certain borrowers based on inaccurate information about their enrollment status. In doing so, Citibank charged late fees when the borrowers did not make payments, even though payments should not have been due. Citibank also erroneously added interest to the loan principal, and failed to refund late fees and erroneously charged interest after discovering that in-school deferments had been terminated in error.

Overstated the minimum monthly payment due on account statements: Citibank serviced some loans for “mixed-status borrowers,” who had multiple student loans with Citibank, some of which were in repayment status, while other loans were in deferment status. While loans were in deferment, no payment was required, though borrowers had the option to make payments on those loans. For mixed-status borrowers with student loans in or approaching repayment, Citibank overstated the minimum amount due on the mixed-status account statements.

Failed to disclose required information after refusing to release a cosigner: Many consumers applied for student loans from Citibank with a cosigner to help guarantee the loan. Some of these borrowers later requested that these cosigners be released for some or all of their student loans with Citibank. When Citibank received an application from a student loan borrower to release a cosigner and place the loan in the borrower’s name only, Citibank would make a determination based on information in the borrower’s credit report and score. When Citibank denied a cosigner release application, it failed to provide the borrower with all of the information required under the Fair Credit Reporting Act.

CFPB Enforcement Action Against Citibank, N.A.

According to the CFPB:

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the [CFPB] has the authority to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices. The CFPB’s order requires Citibank to:

Refund $3.75 million to harmed consumers: 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.

Make changes to their servicing practices: The [CFPB’s] order requires Citibank to provide accurate information regarding student loan interest paid, implement a policy to reverse erroneously assessed interest or late fees, and to 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.

Pay a $2.75 million fine: The [CFPB’s] order requires Citibank to pay a $2.75 million penalty to the CFPB’s Civil Penalty Fund.

A copy of the CFPB’s Consent Order can be viewed by clicking CFPB_Citibank_Consent Order. 

About Kehoe Law Firm, P.C.

Kehoe Law Firm, P.C. is a multidisciplinary, plaintiff–side law firm dedicated to protecting investors and consumers from corporate fraud, negligence, and other wrongdoing. Driven by a strong and principled sense of social responsibility and obtaining justice for the aggrieved, Kehoe Law Firm, P.C. represents plaintiffs seeking to recover investment losses resulting from securities fraud, breaches of fiduciary duty, corporate wrongdoing or malfeasance, those harmed by anticompetitive practices, and consumers victimized by fraud, negligence, false claims, deception, data breaches or whose rights to minimum wage and overtime compensation under the federal Fair Labor Standards Act and state wage and hour laws have been violated.