The Consumer Financial Protection Bureau (CFPB) has fined Citibank $6.5 million due to illegal loan practices. For some Citibank student loan borrowers, the fine could result in payments from Citibank, amounting to $3.75 million. The remaining $2.75 million is a federal fine.
“Citibank’s servicing failures made it more costly and confusing for borrowers trying to pay back their student loans,” said CFPB Director Richard Cordray in a statement. “We are ordering Citibank to fix its servicing problems and provide redress to borrowers who were harmed.”
Problems with Citibank student loan servicing
According to the CFPB, Citibank misled some of its borrowers about their bills, as well as charged late fees and extra interest.
The CFPB said Citibank failed to properly let borrowers know about their qualified student loan interest payments, leading them to miss out on important tax deductions.
The consent order also cited issues in which Citibank canceled some deferments for borrowers — even though they were eligible to postpone payments on their federal loans for up to six months.
“Many of these issues seem to affect those with federal loan payments from a program that ended in 2010,” said Jay Fleischman, a student loan lawyer.
“These are deferments students can take,” Fleischman continued, “and the government will pay interest on subsidized loans. If Citibank was getting rid of deferment on subsidized federal loans, borrowers might have been charged interest when it shouldn’t have been the case.”
The CFPB’s order gives Citibank 90 days to submit a plan for notifying borrowers harmed by their practices, as well as how the bank plans to issue credits.
Loan servicers and CFPB fines
Fleischman pointed out that these types of instances have become increasingly common in recent years. Complaints against student loan servicers are up, and the CFPB has been aggressive in going after lenders and servicers that don’t meet federal guidelines.
However, Fleischman worries that things could change in the future, especially after the current director, Cordray, leaves and is replaced by a President Trump appointee. “This administration has signaled it will be less aggressive against servicer and lender wrongdoing,” he said.
Others, though, see the CFPB as overreaching. Earlier this year, the Department of Education (DOE) ended an information-sharing agreement with the CFPB, saying the agency was too powerful.
Some members of Congress would also like to see more oversight for the CFPB, limiting its ability to levy fines against financial services companies.
Protect yourself against student loan servicers
The Citibank student loan program isn’t alone in making mistakes. “It’s important to understand your rights, and know what to expect,” said Fleischman. “That way, if you find an irregularity, you can call it out.”
With federal loans, you are much more likely to have help, said Fleischman. Rules around deferment and forbearance provide some protection to borrowers, who can point to specific policies and practices servicers might be disregarding.
“With private student loans, though, the only protections you get are in the promissory note,” said Fleischman. “You need to read that carefully to make sure the lender is living up to its end of the bargain.”
If something is wrong, whether it’s a federal or private loan, your first step is to talk to your student loan servicer. Get clarification on the fees charged, and ask for information about the qualified interest you paid. If that fails to resolve the problem, said Fleischman, take other action.
“Realize, though, that these actions won’t likely get you individual justice,” Fleischman said. “Instead, you might be part of a bigger settlement, like the current Citibank agreement.”
In order to get individual justice, no matter the type of student loans you have, Fleischman said you need to file an action in state or federal court. “Unfortunately that can get expensive,” he said. “You might need to find an attorney to work with you on a contingency basis, so you only pay out of your settlement.”
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.57% – 6.97%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|