Citibank Under Investigation: CFPB Probes Student Loan Services
Citibank admitted on Monday that it is under investigation by the Consumer Financial Protection Bureau (CFPB) over its student loan services.
Only a few weeks after Discover Bank was ordered to pay $18.5 million for various inappropriate actions related to their student loan services, Citibank also faces a similar situation.
The CFPB is performing the investigation according to a person who claims to know the matter although Citibank did not reveal what agency is probing their student loan practices.
The CFPB is the same agency responsible for penalizing Discover in July for misinformation and for sometimes practicing illegal and aggressive collection methods. This is the agency's first action related to illegal student loan services.
As of now, there is no information yet on which Citibank practices are being investigated on and CFPB states that it will not release comments on its present investigations.
Last May, the CFPB solicited comments from the public regarding student loan services. The agency wanted to know if student loan borrowers are given sufficient information on how to repay their loans and about practices that the industry is following that could make loan repayment more difficult.
For the two-month period of asking the public's opinion, there were more than 30,000 comments that will be reviewed by the agency in the weeks to follow.
According to CFPB, an estimated 40 million Americans are said to have student loans from either private or government lenders and these loans total to more than $1 trillion.
Citibank was also ordered by CFPB to pay $700 million to almost 9 million customersbecause of illegal credit card practices. The bank was said to have sold deceptive add-on services to its credit card customers.
Loan servicers like Citibank work by informing borrowers about how to repay their loans and how much they owe. They also go to these servicers when they have to change their loan terms or defer payments.