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Discover Bank Ordered to Refund $16 Million to Consumers

Discover Bank Ordered to Refund $16 Million to Consumers - The Beacon

07-2015

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By: Jackie

Discover Bank Ordered to Refund $16 Million to Consumers

Your BBB® has learned that the Consumer Financial Protection Bureau (CFPB) took action against Discover Bank and its affiliates for illegal student loan servicing. According to the Press Release announcing the action, the CFPB found that “Discover overstated the minimum amounts due on billing statements and denied consumers information they needed to obtain federal income tax benefits.” In addition, the CFPB found that the company also “engaged in illegal debt collection tactic s, including calling consumers early in the morning and late at night.”

Discover Bank and its student loan affiliates, The Student Loan Corporation and Discover Products, Inc., acquired more than 800,000 accounts from Citibank in 2010 but, according to the Press Release, failed to provide the most basic functions of adequate student loan servicing for a portion of the Citibank loans. CFPB found that Discover incorrectly included in the minimum payment, the interest on loans that were still in deferment and were not required to be paid. Another finding of the CFPB is that Discover did not tell the Citibank student loan borrowers that in order for them to obtain the amount of interest paid on their student loan, they needed to submit a separate form. Thus, for the borrowers who didn’t submit the form, the amount of interest they paid on their student loan showed as $0.00.

CFPB Director Richard Cordray stated in the Press Release, “Discover created student debt stress for borrowers by inflating their bills and misleading them about important benefits. Illegal servicing and debt collection practices add insult to injury for borrowers struggling to pay back their loans. Today’s action is an important step in the Bureau’s work to clean up the student loan servicing market.”

According to the terms of the Consent Order, Discover agreed to return $16 million to more than 100,000 borrowers, accurately represent the minimum periodic payment, send clear and accurate student loan interest and tax information to borrowers, stop making calls to consumers before 8 a.m. or after 9 p.m., and pay a $2.5 million civil penalty.

For more information you can trust, visit bbb.org/evansville.

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Jackie

Jackie is the Operations and Education Foundation Assistant with the BBB. She assists consumers with business inquiries, and does presentations to senior groups and high school students. She is a regular contributor to the blog.