A $25 million civil money penalty, and a $10 million ding for consumer redress, was ordered against a bank and its student lending subsidiaries for violating previous orders, the federal consumer financial protection agency said Tuesday, continuing its string of pre-Christmas/New Year’s enforcement action news dumps.
The Consumer Financial Protection Bureau (CFPB) said the consent order was issued against Discover Bank (of Greenwood, Del.), The Student Loan Corporation, and Discover Products, Inc. (the latter two organizations are subsidiaries of Discover Bank). The agency said the order was based on its findings that the Discover groups violated a prior CFPB order, the Electronic Fund Transfer Act (EFTA), and the Consumer Financial Protection Act of 2010 (CFPA).
According to CFPB, Discover Bank provides and services private student loans. The Student Loan Corporation and Discover Products, Inc., are affiliates of Discover Bank and also engage in student loan servicing, CFPB said.
Tuesday’s announcement was the fourth such settlement made public by the agency in a week.
According to the bureau, it previously issued a consent order against Discover in July 2015. That order, the CFPB said, was based on the agency’s finding that Discover misstated the minimum amounts due on billing statements as well as tax information consumers needed to get federal income tax benefits. The bureau said it also found then that Discover engaged in illegal debt collection practices.
The 2015 order required Discover to refund $16 million to consumers, pay a penalty, and fix its unlawful practices servicing and collection practices.
More recently, the CFPB said it found that Discover violated the 2015 order’s requirements in several ways, including: it misrepresented the minimum loan payments consumers were owed, the amount of interest consumers paid, and other material information, such as interest rates, payments, due dates, and the availability of rewards, among other things. Discover also did not provide all of the consumer redress the 2015 order required, CFPB said.
The CFPB said it found that Discover engaged in unfair acts and practices by withdrawing payments from more than 17,000 consumers’ accounts without valid authorization and by cancelling or not withdrawing payments for more than 14,000 consumers without notifying them.
“This conduct violated the CFPA, EFTA, and Regulation E,” CFPB said. “The Bureau also found that Discover engaged in deceptive acts and practices in violation of the CFPA by misrepresenting to more than 100,000 consumers the minimum payment owed and to more than 8,000 consumers the amount of interest paid. Some consumers ended up paying more than they owed, others became late or delinquent because they could not pay the overstated amount, while others may have filed inaccurate tax returns.”
The agency said its order prohibits Discover from making any misrepresentations about minimum payments consumers owe, the amount of interest consumers paid, and other material servicing terms. The order also prohibits Discover from withdrawing loan payments from consumers’ bank accounts in amounts or at times not authorized by consumers.
Consumer Financial Protection Bureau Settles with Student Loan Servicers Discover Bank, The Student Loan Corporation, and Discover Products, Inc. for Violating a Bureau Consent Order and Other Unlawful Practices