Wednesday, July 22, 2015
Consumers Union praises CFPB action against Discover Bank for illegal student loan servicing practices
WASHINGTON – Consumers Union, the advocacy arm of Consumer Reports, today applauded the Consumer Financial Protection Bureau’s action against Discover Bank for illegal student loan servicing practices.
The CFPB is ordering Discover to refund $16 million to affected consumers. The company must also pay a $2.5 million fine and make improvements to its billing, reporting and collection practices.
In a statement the bureau said Discover and its student loan affiliates “overstated the minimum amounts due on billing statements and denied consumers information they needed to obtain federal income tax benefits,” and they “engaged in illegal debt collection tactics, including calling consumers early in the morning and late at night.”
Suzanne Martindale, staff attorney for Consumers Union, said, “Students and families who are paying for college deserve better treatment from their loan servicers. This action against Discover sends a strong message that the bureau is serious about holding loan servicers accountable for abusive practices that unfairly punish people who are trying to repay their loans. Discover acquired hundreds of thousands of student loans from Citibank, and it failed to provide sufficient customer service after the transition. These are the kinds of systemic problems we see in this industry, and this action makes it clear that the whole system needs better oversight.”
Pamela Banks, senior policy counsel for Consumers Union, said, “Your student loan servicer has a basic obligation to give you an accurate account of what you owe, tell you what benefits are available, and work with you to ensure your payments stay on track. This action shows how Discover utterly failed to fulfill its most basic responsibilities — overstating bills, withholding crucial information from customers, and harassing people day and night.”
This order comes as the CFPB considers steps to ensure that all student loan borrowers have access to adequate student loan servicing. Consumers Union recently filed comments with the CFPB about the serious need for “rules of the road” to prevent unfair and deceptive practices.
For the past two years, Consumers Union has been collecting stories from students and families about their personal experience taking out loans to pay for college. CU has shared many of these stories with the CFPB as it considers steps to clean up the student loan servicing system. People across the U.S. told Consumers Union about the enormous frustrations of dealing with student loan servicers, particularly the challenges of getting timely, accurate information and the difficulty in finding affordable repayment options.
Consumers Union’s full comments to the CFPB about student loan servicers, including highlighted stories from consumers, are available online here.