WASHINGTON — Discover Bank and two of its affiliates have been hit with $35 million in penalties by the Consumer Financial Protection Bureau over its student loan servicing practices.
According to the CFPB, Discover, along with The Student Loan Corp. and Discover Products moved to a new student loan servicing platform that led to harm to consumers and a number of violations of a 2015 enforcement action between Discover and the CFPB.
The Bureau has ordered the bank to pay $10 million in consumer redress in addition to a $25 million civil penalty as a result of the most recent order. According to the CFPB, Discover Bank electronically withdrew payments from more than 17,000 consumer accounts without proper validation and canceled payments for more than 14,000 consumers without notifying the borrowers.
The CFPB said it further found Discover had also misrepresented to more than 100,000 consumers the amount of the minimum payments that were owed, and additionally misrepresented to more than 8,000 consumers the amounts of interest paid.
The CFPB alleged Discover became aware of the data migration issues during a 2017 exam, but was not fully transparent with the agency regarding potential violations of the previous order.
"Although Respondent was aware of potential Consent Order Violations arising from the Migration while Bureau examiners were on-site examining Respondent’s compliance with the 2015 Consent Order, Respondent did not report these violations to the Bureau at that time," the Bureau said in its order.