Citibank Charges Student Loans Late Fee From 2005

Sean writes:

When I went to check the statement on my wife’s student loan through CitiBank for November, I noticed a late fee listed. As we signed up to pay via direct debit for the interest rate deduction, we get no paper statements. I checked my records, and our last payment had been processed for the full amount, on the due date. I asked my wife to call and find out why we were being charged a late fee. The representative told her that it was to correct an error from 2005. There is no explanation on the site, and when my wife asked to speak to a supervisor, the supervisor told her that there were no plans to notify people being charged these fees. My wife had to specifically request that a letter be sent detailing these fees.

Rather than the $175 dollars we usually pay each month, the automatic deduction this month will be $225. We have the funds available to cover this difference, but many people with tight budgets may not.

latefee.jpg

The only option to avoid this jump is to cancel the automatic payment (and lose the interest rate reduction). Of course, this doesn’t help if they are going to report you as not paid-in-full or as delinquent to the Credit Bureaus. It seems very shady that they would suddenly up your payment, charge late fees from 2 years ago, and not provide any notification. From what my wife understood from her conversation with the CSR, this is something they’ve done with loans across the board, including some which may have been listed as paid-in-full.

I’ve attached screen shots of our October and November statements for comparison. (Looking at the November statement, it appears that they’ve actually already applied the late payment and reduced the amount applied to principal, so we’re paying interest on principal that should have been paid with the October payment as well.)

-Sean

While we respect CitiBank’s right to correct their banking errors, it seems kinda rude to do it without giving people a heads up. Like Sean says, for those out there who sometimes keep their bank account barely above zero, such as poor students, this correct could come as a most unwelcome surprise if it results in an unexpected overdraft and overdraft fees.

If you have a student loan with CitiBank, either current or paid off, might want to check and see if they plucked an extra Ulysses S. Grant from your account for November.

Comments

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  1. entitynein says:

    Interesting, particularly because I have one bank account soley used for the payment of my student loans which never has additional funds above the monthly fee deposited. Luckily, I don’t have any student loans through Citi, but I’ll keep an eye on my account in any case.

  2. Falconfire says:

    umm I dont think this is exactly legal is it? I mean if I asked for 300 dollars from someone then noticed 2 years later it was 350 dollars I needed, I know i couldnt go back legally and say “oh hey you owe me 50 more bucks cause i screwed up.” A judge would laugh you out of court and make you pay all the legal fees.

    If this IS legal, then I pray to god some government official with sway can go in and make it not legal fast. I mean whats to stop them then from making crap up to fund their bottom line. They make crap up now as it is.

  3. Rando says:

    It’s called an audit, and they’re perfectly legal.

    If the terms state you will recieve a late fee when you are late, and the system some how over looks it, then they catch it down the road, they have every right.

  4. Beerad says:

    @Falconfire: Aren’t you overreacting just a little bit? If it was truly an error, then it stinks but yeah you owe them the extra money (I defy you to find one person who actually amortized the proper monthly student loan payment themselves rather than letting the lender do the work).

    “What’s to stop them then from making crap up to fund their bottom line”? How about the fact that “making crap up to fund [one's] bottom line” is a huge crime, violating many different (and all very serious) federal laws? If you’re worried you’re being defrauded by your lender, you probably have bigger concerns than the fact that they’ve identified a math error.

    As enticing as it might be to simply steal an extra $50 bucks from all of your debtors, this probably isn’t the smoothest way to do it.

    And FWIW, if the loan is being paid out over several years (perhaps 30), the fact that the error was two years ago (and the loan is still outstanding) probably doesn’t matter. If your loan was completely paid off it might be an issue, but that’s not the situation here. Look at it this way, let’s say I agree to repay you $1000 over 10 years, giving you $110 per year (assume you get a flat 10% interest). If it’s year five and checking your files you notice that I only paid you $80 two years ago by mistake, would you just shrug and say “well, there’s nothing I can do to fix it, oh well” or would you ask me for the money?

  5. Crymson_77 says:

    @Beerad: The problem with some of your logic is that they admitted to committing this same activity on PAID accounts. While this is legal under an audit standpoint, randomly charging people like this is, as far as I remember, against the law unless the person being charged is informed in advance of the charge. Frankly, this isn’t surprising from a bank that just wrote off, or will write off, more than 15 BILLION. Citi’s shady practices are biting them in the ass finally, karma sucks huh?

  6. Rando says:

    @Crymson_77: Everyone uses audit practices. Companies always have to check their tracks. No system/CSR is perfect

  7. cindel says:

    Time to check my account. Damn you Citi..

  8. paleck says:

    Why am I all of a sudden shuddering about my Citi cortgage…

  9. morydd says:

    Hi, I’m the aforementioned Sean who submitted this. What’s interesting is the letter my wife requested has still not appeared, and when the payment processed this month, it was neither the usual $175 amount nor the $225 amount shown on the statement but $185. (Is deducting a different amount than what is shown on the statement allowed?) Also, the December statement is showing late fees again, but the “Loan Status” page doesn’t show any late fees. I’ll post screen shots of those if anyone’s interested later tonight.

  10. noquarter says:

    The numbers for Nov 2007 don’t add up.

    Principal + Interest + Late Fees != Amount Due on any of the three rows.

  11. Beerad says:

    @Crymson_77: Well, no disrespect to the OP, but I’m not going to equate “my wife’s conversation with a CSR” as “the company admitted to charging customers already paid in full.” If a company is allowed to debit your bank account forevermore once you’re signed up for autopay (even after the agreement term ends) that seems like something to take up with your bank (admittedly, this is Citi dealing with Citi, so that may be of limited application to this particular scenario).

    And it’s not random — they apparently only charged people who owed them money.

  12. Falconfire says:

    @randotheking and @Beerad: Its no different that a company realizing you paid 4.95 for a shirt when you SHOULD have paid 10.95. They cant charge your card again for the money, and Citi shouldn’t be able to charge you again for a late fee because of a clerical mistake on their part. If a layperson couldnt do it in a court of law, and bank shouldnt have its own special rule saying “we can and will.”

    If they dont get it right the first time, they deserve the loss to their profits.

  13. tadowguy says:

    Wow, it’s that bad at Citibank!?

  14. Beerad says:

    @Falconfire: I hope you never go into business with that philosophy. The first time one of your employees writes down $100,000 instead of $1,000 by accident, you’ll be out of business. And if that was the law, banks would cease to exist. It’s a big, complex business with lots of numbers flying around. Mistakes happen.

    I’m not sure what you think a layperson can’t do in a court of law, but courts routinely do not hold people to obligations that are clearly mistakes (not “bad judgment” but simple errors).

  15. warf0x0r says:

    Did they say it was for a delinquent payment in 2005? I would think the borrower would be able to remember a late payment if they aren’t making a bunch. If you didn’t pay late then I’d say call em on it. If they say T.S. I believe you can go to the state A.G., right?

  16. ColoradoShark says:

    Could it be related to this story:
    [consumerist.com]

    They’ll get their $15 billion back by screwing over every student loan a little bit.

  17. socalrob of the 24 and a half century says:

    I worked for CitiGroup earlier this year. They aren’t that slick. They fired 90% of their tech support staff and brought in Dell. Needless to say I was paid alot of money to sit there and do nothing most of the day. All I did was move people’s PC’s and occasionaly re-plug in their keyboard or whatever the accidently unplugged. Citi itself handled everything else.

    Like I said they aren’t that slick. I left there because they ended up closing the office I worked at and fired alot more tech staff, all in the name of cutting budgets.

  18. arkitect75 says:

    I’ve got a nice fat student loan through CitiBank that I’ll be working to pay off for a few more years. Two things that they got me on were:
    1- CitiBank offered a 1/2% rate reduction for making on time payments if your loan originated before a certain date (I can’t recall the exact date). This reduction would occur if you made on time payments for 48 consecutive months. When I was getting close to my four year “anniversary” I looked up my loan dates, etc. and found out that I had signed them a few months before the the deadline and the funds were distributed before the deadline. I assumed that all was well. One day, when inquiring/ verifying how many months I had left until my 1/2% reduction, I was told the number of months, and then told that I only qualified for a 1/4% reduction. Well, it seems that they adjusted the date to be one day AFTER the 1/2% threshold. I spoke to many supervisors, etc to no avail.
    2- I actually didn’t get my 1/4% reduction at 48 months, but something like 56 months, because of “computer errors”. After Hurricane Katrina hit my area (South FL), CitiBank was nice enough to place my loans into forbearance to “help me out”. I didn’t need this, so I immediately requested it to be removed, as this would advance my payoff date. I got a letter a few days later telling me that the forbearance was removed. Well, ONE day later, I got another letter “helping me out” again by putting my loans back into forbearance. I called again and got it removed again. After that I tried to find out what was going on but was told that it was a computer glitch that automatically put me back into forbearance based on my home location. I demanded that this be fixed b/c as I found out, the 48 consecutive months are of REQUIRED payments. Since when you’re in forbearance you aren’t required to pay, and since the computer kept putting back into it, I had to wait an extra eight months.
    In the long run, I’ve gotten my rate reduction, put another 1/4% for a total of 1/2%, but it was not without its headaches.

  19. scoosdad says:

    “As we signed up to pay via direct debit for the interest rate deduction, we get no paper statements.”

    Is this something unique to student loans, that you can only claim the interest as a tax deduction if you have it taken out by direct debit? For example, If I send a check in the mail to my mortgage company every month, I still get to claim the interest paid as a deduction at tax time; it makes no difference how I pay it.

  20. morydd says:

    @scoosdad: “deduction” was a typo on my part, should read “reduction”.

  21. edmauss says:

    Here’s a good one for you: I’ve been a Citibank customer since 1986, yet I just got screwed on a new HELOC. A representative solicited us to replace our HELOC at the bank with a new HELOC carrying a higher limit (remember: both HELOCs at Citibank). She assured us repeatedly there would be no cost to do this. About a month after establishing the new HELOC, the bank sent us a statement showing an early termination fee of $1,085 for the old HELOC. I believe the bank violated TILA, RESPA and FDIC policy statement 500. Nice! Time to close my accounts.