CFPB settles student loan case with Discover
the Consumer Financial Protection Bureau (CFPB) settled with student loan managers Discover the Bank, The Student Loan Corporation and Discover Products (collectively Discover) in a 2015 case for illegal practices, and Discover will have to pay $ 10 million in customer redress, a Press release said.
The case stems from an earlier CFPB order based on the finding that Discover had inaccurate minimum amounts owed on billing statements as well as tax information customers needed to obtain federal tax benefits.
In addition, CFPB discovered that Discover was engaging in illegal debt collection practices.
After finding this information, CFPB ordered Discover to pay affected consumers $ 16 million, pay a fine and correct its illegal practices. However, the statement says that is not what happened. Instead, Discover allegedly misrepresented the minimum loan payments owed, the amount of interest paid by customers, and other information, and also failed to provide any repairs owed to customers.
According to CFPB, Discover has withdrawn payments from over 17,000 customers without valid authorization and canceled payments from over 14,000 customers without telling them. In addition, Discover also misrepresented the amount of minimum payments due and interest paid to thousands of customers, the release said.
The CFPB order on Tuesday (December 22) prevents Discover from taking these actions in the future, the statement said, and “Discover must pay at least $ 10 million in consumer redress and a civil fine of $ 25 million.” .
Bad student loans are a problem for Americans, with taxpayers facing a $ 435 billion hit from borrowers who fail to repay student loans properly, PYMNTS writing. This figure is close to the losses of banks due to the subprime mortgage crisis in 2008.
According to analysis by the US Department of Education and two private consultants, borrowers who owe a total of $ 1.37 trillion will repay around $ 935 billion. That did not take into account the $ 150 billion held by private lenders but backed by the federal government.
An analyst, University of Chicago Constantin Yannelis, said it was so easy for the government to bail itself out for taking bad loans that it was unlikely to take action to change things.