The CFPB has ordered Discover Bank to refund $16 million to customers and pay an additional $2.5 million penalty in response to UDAP and Fair Debt Collection violations on its student loan portfolio. Specifically, the CFPB claimed that:
“Discover failed at providing the most basic functions of adequate student loan servicing for a portion of the loans that were transferred from Citibank. Thousands of consumers encountered problems as soon as their loans became due and Discover gave them account statements that overstated their minimum payment. Discover denied consumers information that they would have needed to obtain tax benefits and called consumers’ mobile phones at inappropriate times to contact them about their debts.”
The CFPB’ focus on cleaning up the student lending market reflects its relative importance in the overall consumer credit industry:
“Student loans make up the nation’s second largest consumer debt market. The market has grown rapidly in the last decade. Today there are more than 40 million federal and private student loan borrowers and collectively these consumers owe more than $1.2 trillion.”
Overview by Alex Johnson, Sr. Analyst, Credit Advisory Service at Mercator Advisory Group
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