Sunday, September 24

Hall of Shame: Discover Bank to Pay $18.5 Million for Illegal Student Loan Servicing Practices

The job of the most honest seller is to sell you, not to give you reasons to buy from a competitor. That over-riding reality drives the free-enterprise system, and places a responsibility on you.

FoolProof's Hall of Shame is here to remind you why a healthy dose of skepticism should rule your decisions before dealing with anyone who wants to touch your money or your general welfare.

July 22, 2015

Student Loans

"Discover Bank to Pay $18.5 Million for Illegal Student Loan Servicing Practices."

Source: www.consumerfinance.gov

Discover's illegal servicing practices affected private student loan borrowers transferred from Citibank.

The CFPB concluded that the company and its affiliates violated the Dodd-Frank Wall Street Reform and Consumer Protection Act's prohibitions against unfair and deceptive acts and practices, and also the Fair Debt Collection Practices Act.

Specifically, the CFPB found that the company:

  • 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

Enforcement action:

  • 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
  • Cease making calls to consumers before 8 a.m. or after 9 p.m.
  • Pay $2.5 million civil penalty: Discover will pay $2.5 million to the CFPB's Civil Penalty Fund.

For More Information

FoolProof resources to help you with student loans: