Consumer Finance Insights
November 22, 2017

CFPB Settles With National Bank Over Student Lending Practices for $6.5 Million

​On November 21, 2017, the Consumer Financial Protection Bureau (CFPB) announced that it had entered into a consent order with a national bank, resolving allegations over the bank’s allegedly harmful student loan servicing practices and requiring it to pay millions in consumer relief and civil penalties. ​

According to the CFPB, the bank engaged in a number of practices that violated Sections 1031(a) and 1036(a) of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a) and 5536(a), and Sections 615(a)(2)(A)-(B) and 615(a)(3)(A)-(B) of the Fair Credit Reporting Act (FCRA).  Specifically, the CFPB alleged that the bank misrepresented information concerning borrowers’ eligibility to claim tax deductions on the interest paid on their student loans; imposed interest and late fees on students who were still enrolled in school and eligible for loan deferment; misstated the minimum amount due on certain borrower accounts; and failed to provide required information to borrowers when considering a borrower’s request to release a co-signer from their student loans.

Under the terms of the consent order, the bank agreed to pay a total of $6.5 million, including $3.75 million in relief to affected consumers and $2.75 million in civil penalties.  The bank must also change its allegedly unfair practices and submit to additional compliance monitoring.