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Citibank, Discover Bank and SLC Student Loan Fraud Class Action Lawsuit
By Sarah Pierce
A federal class action lawsuit says Citibank, Discover Bank and The Student Loan Corporation are keeping students in debt and ripping them off by tricking them into thinking interest rates on their student loans have been reduced, when in fact the reduction is really a “massive decline” in the amount of money being applied to the principal balance. As a result, student borrowers are paying thousands of dollars in additional interest over the life of their loans, the class action lawsuit says.
Lead Plaintiff Justin Kuehn, who is paying off four student loans from Citibank and Sallie Mae, claims the Defendants “are engaged in a scheme to collect additional interest at the expense of borrowers of student loans.”
According to the student loan fraud class action lawsuit:
“Defendants are deceiving borrowers into believing that their monthly payments have been reduced because of an interest rate reduction, when in fact, the vast majority of the payment reduction is attributable to a reduction in the amount of principal being repaid each month. The end result is an extension of the loans’ repayment term causing thousands of dollars in additional interest to be paid by student loan borrowers over the life of their loans.”
Kuehn says he received a letter from The Student Loan Corporation (SLC) early this year stating that his student loan payments had been dropped from $845.72 to $539.27, “falsely claiming that the change reflected his new interest rates.”
“The interest rate misrepresentation is false, deceptive, and misleading because it masks from borrowers the true reason for the drop in the monthly payment amount — a massive decline in the amount of the loan’s principal being repaid each month,” the class action lawsuit states.
“In January 2012, the interest rate for the Consolidated Private Student Loan was only reduced 0.5 percent, from 9.55 percent to 9.05 percent. According to Plaintiff’s January 2012 statement from SLC, the total current balance of the Consolidated Private Student Loan at that time was $64,791.19. The ‘new interest rate’ does not account for plaintiff’s monthly payment decline of over $300 per month.
“As a result of the reduction to the monthly payment, the amount of principal being repaid on the Consolidated Private Student Loan declined from $335.67 in December 2011 to $42.59 in January 2012, namely, a decline of $293.08 per month, while the amount of interest paid remained basically the same, declining only from $510.05 in December 2011 to $496.68 in January 2012. This fact was not disclosed by Defendants,” the class action lawsuit states.
Kuehn says that when he contacted SLC about the matter, SLC made it extremely difficult to reach a live customer service rep by making him navigate through a lengthy automated process. Once he finally reached one, he says he was given varied and inconsistent answers as to why his monthly payment declined so dramatically. He also says SLC refused to return his monthly payment to the original amount.
Kuehn is seeking treble damages for breach of contract and business law violations, as well an injunction prohibiting the Defendants from continuing the alleged deceptive practices.
The case is Justin A. Kuehn v. Citibank, N.A., The Student Loan Corporation and Discover Bank, Case No. 12-cv-03287, U.S. District Court, Southern District of New York.
Updated May 1st, 2012
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7 thoughts onCitibank, Discover Bank and SLC Student Loan Fraud Class Action Lawsuit
I have a similar problem like Kuehn with discover student loans. I have paid thousands of dollars and yet my principal balance seems to have plateaued. In January and April this year, I was surprised to receive Two small checks stating that it was compensation for the impact of a past issue where Discover billed me a monthly minimum payment amount that was understated. I had in the past called them to complain about my principal balance which had stayed the same and they explained it away and mailed some documents to me last year. I’m just tired of making all these payments for nothing. I need help and I don’t mind suing them. Thanks!
I am having the same problem. I paid on my student loans the entire time I was still in school and have paid on them monthly for 3 years now without ever missing a payment, yet my principal balance has not gone down.
My wife is having the same problem with her student loans wiTh Discover Who can I contact about this and the phone call from 6 to 9 times a day minimum are getting ridiculous
I have 98000 student loan that I paid faithfully for 7 yrs however, my principal has not gone down but since I stopped paying until I could renogotiate the principal and interest it has now gone over 100,000. I will never pay this off in my lifetime. How can this be fair? What options do I have. I believe I have paid in excess of 55,000 toward this loan. I would love to sue but cannot find anyone who knows how to go against Citibank.
Citibank sold my student loan to Discover and I was charged more than $2,000.00 for origination fees. I did not have knowledge of transferring my student loan to Discover. I truly believe that Banks should pay for the fraudulent dealings they do with their customers.
I am just waking up to researching these fraudulent tactics. I took out a federal loan from Cal State University East Bay in Hayward, Ca back in 1987 in the amount of approximately $5000 from Citibank SLC. I took some deferments and some forbearances. I paid when I had to pay. I graduated in 1991 and had difficulty working due to the dot com bust, I majored in computer science. I then changed my career path and now work for the State of California in a completely different field. Somewhere along the line several years ago my loan was sold to Sallie Mae. I didn’t pay attention to the principal or interest as I kept payment. So, now my loan is at over $10,500 and I am scratching my head as to what happened. I think there’s something wrong here. I do know that between Citibank SLC and Sallie Mae my loan was split into 4 different loans, and then was consolidated. I am not sure what that means and how that would have affected the balance or the payments. I am very concerned. I have requested a full history from CSU East Bay, and I will be calling Citibank tomorrow for a full history on this account, and Sallie Mae as well.
Is there anyone who can provide some valuable insight or direction.
Thank You,
Jayshree Chauhan
I am interested in receiving updates on the Citi Bank class action lawsuit.