Citibank penalized for student loan servicing failures

The CFPB issued a release yesterday announcing action against Citibank, N.A. for student loan servicing failures. The agency said that Citibank misled borrowers into believing that they were not eligible for a valuable tax deduction on interest paid on certain student loans; incorrectly charged late fees and added interest to the student loan balances of borrowers who were still in school and eligible to defer their loan payment; misled consumers about how much they had to pay in their monthly bills and failed to disclose required information after denying borrowers’ requests to release loan cosigners. The Bureau issued a Consent Order requiring Citibank to end the illegal servicing practices, and to pay $3.75 million in redress to consumers and a $2.75 million civil money penalty.