Discover Slapped for Cheating 100,000+ Student Borrowers

Photo (cc) by CollegeDegrees360

Discover Financial Services has been ordered to pay $18.5 million for illegal private student loan servicing practices.

According to the Consumer Financial Protection Bureau, the Illinois-based lender cheated more than 100,000 student borrowers by inflating minimum payments due on their loans, failing to provide them with information to obtain income tax benefits and violating federal debt collection laws.

The CFPB ordered Discover to refund $16 million to student borrowers and pay a $2.5 million penalty. The bank must also overhaul its billing, student loan interest reporting and collection practices.

“Discover created student debt stress for borrowers by inflating their bills and misleading them about important benefits,” said CFPB Director Richard Cordray. “Illegal servicing and debt collection practices add insult to injury for borrowers struggling to pay back their loans. [Wednesday’s] action is an important step in the bureau’s work to clean up the student loan servicing market.”

Discover’s student loan affiliates, The Student Loan Corp. and Discover Products, Inc., were included in the CFPB’s charges.

Discover acquired more than 800,000 student loan accounts from Citibank in 2010, according to the CFPB.

“As a loan servicer, Discover is responsible for providing basic services to borrowers, including accurate periodic account statements, supplying year-end tax information, and contacting borrowers regarding overdue amounts,” the CFPB said. “Discover failed at providing the most basic functions of adequate student loan servicing for a portion of the loans that were transferred from Citibank.”

In addition to duping borrowers into paying higher minimum monthly payments, which caused some borrowers to fall behind and pay late fees and penalties, Discover also misled thousands of borrowers by falsely telling them that they paid no interest on their loans so borrowers mistakenly thought they weren’t eligible for tax deductions. Borrowers will have to amend their 2011 and 2012 tax returns to claim student loan interest deductions.

The lender is also accused of placing more than 150,000 calls to borrowers at inappropriate times, such as before 8 a.m. and after 9 p.m. Some borrowers received dozens of calls during those off-limit times.

Discover is one of the largest lenders of private student loans in the United States, with a $9 billion portfolio of private student debt.

What do you think of the CFPB’s action against Discover? Share your comments below or on our Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
9 Genius Storage Solutions for Your Home
9 Genius Storage Solutions for Your Home

These creative products on Amazon will hide unsightly clutter while saving space.

15 Amazon Purchases That We Are Loving Right Now
15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

7 Reasons Workers Age 65 and Older Have Not Retired Yet
7 Reasons Workers Age 65 and Older Have Not Retired Yet

For some, the golden years are a time to increase the gold — but their reasons for delaying retirement vary widely.

12 Tech Gadgets That Make Daily Life Easier
12 Tech Gadgets That Make Daily Life Easier

These products on Amazon will ease worries and simplify your routine.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

9 Deep Discounts Available on Amazon This Friday
9 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

14 Things That Are ‘Free’ With Medicare
14 Things That Are ‘Free’ With Medicare

These services could save you money and help prevent costly health problems.

15 Products You Need — Even If You Didn’t Know It
15 Products You Need — Even If You Didn’t Know It

Discover some must-have products on Amazon that you didn’t even know you were missing.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

Do This in the Car If You Want to Avoid COVID-19
Do This in the Car If You Want to Avoid COVID-19

It takes just seconds to take this simple preventive measure.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.