Just weeks after Discover was ordered by the Consumer Financial Protection Bureau to pay $18.5 million for illegal student loan servicing practices, Citibank is facing a probe into its own practices.
In a filing dated August 3, 2015 with the Securities and Exchange Commission, the banking giant indicated that federal regulators have opened a probe into its student loan servicing practices.
Though Citi didn’t indicate which federal agency is conducting the investigation or which student loan practices are the subject of concern, a source tells Bloomberg that that it is part of a crackdown by the Consumer Financial Protection Bureau.
The investigation comes nearly five years after the company sold nearly $28 billion in securitized federal loans to Sallie Mae, and nearly $4.2 billion of private loans and $3.4 billion of securitized loans to Discover Bank. Since that time, Citi has largely remained out of the student loan business.
The Citi student loans, by the way, were the same ones that landed Discover in hot water with the CFPB in July 2015.
Loan servicers like Citibank are responsible for communicating with borrowers, sending invoices, collecting payments, keeping accurate records and handling deferments and forbearances.
Image credit: bruceg1001