The Consumer Financial Protection Bureau yesterday issued a consent order against a student loan servicing company for violating a prior consent order in which it was accused of mis-stating minimum amounts due on billing statements and engaging in illegal debt collection practices. In this newest consent order, Discover Bank, the Student Loan Corp., and Discover Products will have to repay $10 million to affected consumers and a civil money penalty of $25 million.
The CFPB previously entered into a consent order with the company, collectively known as Discover, back in 2015. Back then, the company paid a fine and repaid $16 million to affected consumers.
A copy of the consent order can be accessed by clicking here.
Many of the problems complying with the terms of the 2015 order stemmed from a migration to a new servicing platform that was conducted in 2017, according to the consent order. Even though it knew of potential violations of the consent order, Discover did not report the violations to the CFPB. It allegedly misrepresented the minimum payment owed to more than 100,000 consumers. In some cases, consumers may have become late or delinquent on their loan balances because they paid what they were told, which would not have been enough. Among other misrepresentations that were made to nearly 400,000 consumers were:
- the amount of interest some consumers owed due to charging incorrect interest rates or incorrectly capitalizing interest
- the applicable interest rate
- how payments would be allocated by failing to properly apply consumers’ payments
- the due date, amount due, or whether a payment was past due
- repayment information
- the availability of a reward or a discount, among other things
Along with paying the fine and repaying consumers, Discover is also prohibited from making any misrepresentations about minimum payments owed by consumers and the amount of interest that has been paid. The servicer is also barred from withdrawing loan payments from consumers’ bank accounts in amounts or at times not authorized by consumers.
