Feds Target Dishonest Student Lending, Order Bank to Pay Back Millions to Borrowers
Discover Bank has been ordered to refund $16 million to consumers and pay a $2.5 million penalty for engaging in illegal private student loan servicing practices, according to the government’s Consumer Financial Protection Bureau (CFPB).
CFPB said that it had found that Discover overstated the minimum amounts due on billing statements and denied consumers information they needed to obtain federal income tax benefits.
The company were also found by CFPB to have engaged in illegal debt collection tactics, including calling consumers early in the morning and late at night.
CFPB subsequently ordered Discover to refund $16 million to consumers, pay a $2.5 million penalty, and improve its billing, student loan interest reporting, and collection practices.
In a statement, CFPB Director Richard Cordray said “Discover created student debt stress for borrowers by inflating their bills and misleading them about important benefits.”
He added that the Illegal servicing and debt collection practices only “added insult to injury”, as debt-burdened students and former students struggled to pay off their loans.
Hopefully this crackdown will discourage other lenders in the market from ripping people off.
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