Discover Bank to Pay $18.5 M for Illegal Student Loan Servicing Practices

According to the Consumer Financial Protection Bureau (CFPB) “Discover created student debt stress for borrowers by inflating their bills and misleading them about important benefits,” said CFPB Director Richard Cordray. “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.”
Discover Bank is an Illinois-based depository institution. Its student loan affiliates – The Student Loan Corporation and Discover Products, Inc. – are also charged in today’s action. Beginning in 2010, Discover expanded its private student loan portfolio by acquiring more than 800,000 accounts from Citibank. As a loan servicer, Discover is responsible for providing basic services to borrowers, including accurate periodic account statements, supplying year-end tax information, and contacting borrowers regarding overdue amounts.

• • Overstated the minimum amount due in billing statements.
• Misrepresented on its website the amount of student loan interest paid.
• Illegally called consumers early in the morning and late at night, often excessively.
• Engaged in illegal debt collection tactics by failure to comply with the consumer notices required by federal law.

Copy of the Consent Order

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