Student loan borrowers wronged by the private lender Citibank will receive compensation ranging from $47 to $250 and the return of late fees and overpayment for those eligible. But you won’t know if you qualify until Citibank completes its repayment plans.
In late November, the Consumer Financial Protection Bureau ordered Citibank to compensate borrowers because, as it serviced loans, it charged erroneous late fees and interest; misled borrowers about minimums, leading to overpayment; didn’t provide required information to borrowers who were denied loan co-signer release; and misled borrowers about their eligibility to receive a tax deduction for interest payments.
In its order, the CFPB indicated how much affected student loan borrowers could expect to receive:
- Borrowers who paid undue late fees: total amount paid
- Borrowers affected by prematurely capitalized interest: $47
- Borrowers with multiple student loans who overpaid minimum payments: total amount of the overpayment
- Borrowers denied loan co-signer release: $250
- Borrowers who missed out on the student loan tax deduction: nothing, but borrowers can amend previous tax returns to claim the deduction
Citibank must pay borrowers a total of $3.75 million. It will also pay a $2.75 million fine and make changes to its servicing practices.
Until Citibank submits its redress plan there’s no telling how many affected consumers will be eligible, according to Sam Gilford, a spokesperson for the CFPB. Citibank must submit the plan within 90 days of the order, and the plan must be deemed complete before borrowers can receive payment. Citibank will reach out to eligible borrowers.
Citibank stopped servicing its private student loans earlier this year and transferred most of its portfolio to Firstmark Services. If a borrower’s loans are still serviced by Firstmark, he or she will receive the payment as an account credit. Borrowers who no longer have a Firstmark account will receive a check from Citibank or Firstmark.
This is the second time in 2017 that the CFPB has taken action against a student loan servicer. In January, the CFPB and multiple state attorneys general sued Navient, the largest servicer of federal student loans. In 2015, the CFPB also took action against Discover for its private student lending practices.
If you’re having trouble with your loan servicer, submit a complaint to the CFPB.