On July 22, 2015, the CFPB entered into a consent order against Discover Bank regarding its student loan servicing practices. According to the CFPB, Discover Bank and its affiliates overstated the minimum amounts due on billing statements, denied consumers information they needed to obtain federal income tax benefits, and engaged in illegal debt collection tactics, including calling consumers early in the morning and late at night. According to the CFPB, Discover's illegal loan servicing practices harmed private student loan borrowers who were transferred from Citibank to Discover in 2010, when it acquired more than 800,000 accounts from Citibank. The CFPB's order requires Discover to refund $16 million to consumers, pay a $2.5 million penalty, and improve its billing, student loan interest reporting, and collection practices.
The CFPB concluded that Discover and its affiliates violated the Dodd-Frank Wall Street Reform and Consumer Protection Act's prohibitions against unfair and deceptive practices, as well as the Fair Debt Collection Practices Act (FDCPA), specifically when the company:
- Overstated the minimum amount due in billing statements for borrowers who were just starting to pay off their student loan debts;
- Misrepresented on its website the amount of student loan interest paid;
- Illegally called consumers early in the morning and late at night. The CFPB found that Discover learned about these violations in 2012 but failed to address the problem until February 2013; and
- Engaged in illegal debt collection tactics.
Under the terms of the consent order, Discover must pay a $2.5 million civil money penalty, as well as return $16 million to more than 100,000 borrowers by providing an account credit to consumers who were misled about their minimum payments, reimbursing tax preparation costs for consumers who had to amend their 2011 or 2012 tax reports to claim student loan interest deductions, and providing account credits to consumers subjected to out-of-time collection calls. In addition to monetary relief, the consent order also:
- Enjoins Discover from misrepresenting to consumers the minimum periodic payment owed, the amount of interest paid, or any other factual material concerning the servicing of their loans;
- Requires Discover to send clear and accurate student loan interest and tax information to borrowers; and
- Prohibits Discover from making calls to consumers before 8 a.m. or after 9 p.m.