The Consumer Financial Protection Bureau has ordered a private student-loan servicer to refund nearly $16 million to borrowers after the federal agency found evidence of illegal practices. According to a consent order filed by the bureau, Discover Bank overstated in billing statements the minimum amount borrowers had to pay, engaged in illegal collecting practices, and did not provide necessary tax information to borrowers.
“Discover created student-debt stress for borrowers by inflating their bills and misleading them about important benefits,” said the bureau’s director, Richard Cordray, in a news release. “Illegal servicing and debt-collection practices add insult to injury for borrowers struggling to pay back their loans. Today’s action is an important step in the bureau’s work to clean up the student-loan-servicing market.”
Along with returning a total of $16 million to more than 100,000 borrowers, Discover must pay a $2.5-million penalty and improve its billing and collection practices.
As part of the consent order, the bank did not admit to or deny any of the bureau’s findings.