The Consumer Financial Protection Bureau said in a consent order that Citibank improperly misled borrowers into believing they were ineligible for a tax deduction on interest they paid on certain student loans. Student loan borrowers who were effected, will share $3.75 million in payments from Citibank for financial practices that forced them to make overpayments, a federal watchdog said this week.
In addition, the bank incorrectly charged late fees and extra interest to borrowers who were still in school and eligible to defer repayments on their student loans. Citibank also misled borrowers about their monthly bills and failed to disclose required information after the bank denied borrower requests to release loan co-signers.
“Citibank’s servicing failures made it more costly and confusing for borrowers trying to pay back their student loans,” Richard Cordray, the consumer bureau’s director, said in a statement issued with the announcement.
Federal law allows student loan borrowers to deduct as much as $2,500 in annual interest they pay on student loan debt. However, Citibank made statements that suggested the borrowers had not paid qualified interest or were ineligible for the deductions.
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