Citibank investigated over its student loan services
NEW YORK — It’s tough to pay back student loans, particularly if your bank is inflating your monthly bill or giving out misinformation.
Weeks after Discover was ordered to pay $18.5 million for doing just that, Citibank says it is facing a probe into its own student loan services.
Citibank did not disclose in a regulatory form it filed Monday what agency is conducting the investigation, but a person familiar with the matter confirmed that it is being done by the Consumer Financial Protection Bureau.
It was the CFPB that penalized Discover in July for overstating the minimum amount due on bills, misrepresenting how much interest some students had paid, and engaging in aggressive and sometimes illegal collection practices.
It’s unclear which of Citibank’s student loan practices the CFPB is looking into. The CFPB said only that it does not comment on its current investigations.
In May, the federal agency launched a public comment period concerning student loan services. It wanted to hear from student borrowers about industry practices that may make the loan repayment process more stressful and if they receive enough information about how to pay back their loans.
It received about 30,000 comments over the two-month period and will be reviewing them in the coming weeks, a spokeswoman said.
More than 40 million Americans currently have student loans either from the government or private lenders. They owe more than $1.2 trillion, according to the CFPB.
Loan servicers like Discover and Citibank are the ones that communicate with borrowers about how much they owe and how to pay it. Former students go to those institutions if they need to defer a payment or modify their private loan terms.
In 2010, Discover began acquiring most of Citibank’s student loan business, which included more than 800,000 accounts. Citibank no longer offers student loans.
The action against Discover was the CFPB’s first concerning illegal student loan practices.