Consumer Financial Protection Bureau Cites Illegal Student Loan Practices

For former students across the country who help to account for the billions of dollars in student loan debt currently owed, filing for consumer bankruptcy will most likely not make those payments go away. While it is not impossible to discharge student loans in bankruptcy, it tends to be a pretty arduous process. The difficulty of discharging student loans through personal bankruptcy doesn’t mean that lenders can treat those borrowers unfairly. According to a recent article in Forbes Magazine, the Consumer Financial Protection Bureau (CFPB) recently “slammed” Discover for its illegal student loan servicing practices.
Getting the Right Information About Your Loans
Many Chicagoans have first-hand knowledge of the burden of student loan payments. Most of us also know that mounting debt often leads Illinois residents to seek bankruptcy protection. Before you get to the point where you can’t make monthly payments, you need to know what your monthly payments are and how to fulfill your debt obligations. Yet Discover, according to the CFPB, did not make that possible for many of its borrowers.
The CFPB’s actions against Discover Financial Services relate to the servicer’s “illegal student loan servicing practices,” and the agency is charging Discover “$18.5 million and ordering the company (and its affiliates) to clean up its billing, interest reporting, and collection practices.” A recent CFPB investigation uncovered evidence that Discover did the following:
  • Overstated minimum amounts due on student loan bills;
  • Failed to provide debtors with interest information for tax purposes; and
  • Committed illegal debt collection practices, such as calling debtors beyond the hours set by the Fair Debt Collection Practices Act (FDCPA).
The Federal Trade Commission emphasizes that the FDCPA prohibits debt collectors from contacting borrowers at “inconvenient times or places, such as before 8 in the morning or after 9 at night.” The FDCPA also prohibits debt collectors from calling borrowers at work if they have made clear that they cannot receive calls at their places of employment.
Putting Added Stress on Student Borrowers
Discover started to purchase student loans from Citibank back in 2010, and since then it has collected hundreds of thousands of student loan accounts. In addition to loans Discover originally serviced, a number of the accounts at issue originally were owned by Citi. For numerous borrowers, Discover sent bills with minimum monthly payments that “included interest on loans that were still in deferment and therefore not required to be paid.” The loan servicer also avoided providing information about interest paid, preventing borrowers from claiming certain tax deductions.
Given that information, combined with the debt collection calls made before and after hours, the CFPB determined that Discover violated the Dodd-Frank Wall Street Reform Act and the FDCPA. The CFPB ordered the company to pay more than $18 million for these violations. About $2.5 million will go to the CFPB’s Civil Penalty Fund, while an additional $16 million will provide financial recompense for borrowers who have been harmed by Discover’s loan servicing practices.
Do you have questions or concerns about your rights as a student loan borrower? Do you have concerns about filing for bankruptcy with substantial student loan debt? An experienced Chicago consumer protection lawyer at the Emerson Law Firm can speak with you today.
See Related Blog Posts:
College Tuition Payments and Personal Bankruptcy

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