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Citigroup under investigation over student-loan servicing
[NEW YORK] Citigroup Inc is being investigated over its student-loan servicing practices in a probe that the bank said echoes an enforcement action against at least one other institution.
Citigroup, which didn't disclose which regulatory agency is involved, is cooperating with the probe, the New York-based firm said Monday in a filing. The investigation may result in penalties or having the bank offer restitution to customers, Citigroup said.
Jennifer Lowney, a Citigroup spokeswoman, declined to comment beyond the filing. The bank didn't disclose the other firm it cited.
The US Consumer Financial Protection Bureau last year was involved in a similar investigation into Discover Financial Services. The Riverwoods, Illinois-based company disclosed the probe in February 2014 and last month agreed to refund US$16 million to consumers and pay a US$2.5 million penalty. The CFPB found the firm overstated minimum amounts due on billing statements and denied consumers information needed to obtain income-tax benefits.
Citigroup exited most of its student-loan business in September 2010 when the bank sold its majority stake in Student Loan Corp to Discover, unloading US$4.2 billion of private loans and US$3.4 billion of securitized loans. SLC separately agreed to sell US$28 billion of securitized federal student loans and related assets to SLM Corp, known as Sallie Mae. At the time, the bank said it would keep US$8.7 billion of federal and private loans and look to sell those over time.