Discover fails to provide sufficient student loan customer service

Frustrations abound for Americans dealing with student loan servicers

Published: July 25, 2015 10:00 PM

For the past two years, Consumers Union, the policy and advocacy arm of Consumer Reports, has been collecting stories from students and families about their personal experiences when it comes to taking out loans to pay for college.  Unfortunately, most of those stories have not been pretty. People across the U.S. told Consumers Union about the enormous frustrations of dealing with student loan servicers, particularly the challenges of getting timely, accurate information and the difficulty in finding affordable repayment options.

To help resolve such problems, Consumers Union shared many of these stories with the Consumer Financial Protection Bureau as it considers steps to clean up the student loan servicing system.

Read more about proposals to make the student loan repayment process simpler.

Earlier in the week, the problems so many families face were brought to light when the Consumer Financial Protection Bureau released a statement that Discover Financial Services had overstated the minimum amounts due on billing statements for student loans. In addition, the CFPB said that Discover denied consumers information they needed to obtain federal income tax benefits. It also said that the company engaged in illegal debt collection tactics, including calling consumers early in the morning and late at night.

“Discover acquired hundreds of thousands of student loans from Citibank, and it failed to provide sufficient customer service after the transition,” said Suzanne Martindale, staff attorney for Consumers Union. These are the kinds of systemic problems we see in this industry, and this action makes it clear that the whole system needs better oversight.”

Pamela Banks, senior policy counsel for Consumers Union, agreed.  “Your student loan servicer has a basic obligation to give you an accurate account of what you owe, tell you what benefits are available, and work with you to ensure your payments stay on track,” she said.

As a result, the CFPB ordered Discover to pay a $2.5 million fine and refund affected consumers $16 million. Discover was also ordered to improve its application of billing, reporting, and collection services.

Marcy Robles

 


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