Citibank Transfers Student Loan To Another Company, But Sits On $1000 Payment For 30 More Days

The last time I uncovered an obvious error with my Citibank checking account, I realized it was time to move on. Our tipster Roarke may have just reached that same conclusion, only in his case Citibank has already passed along the account for him–just not the thousand dollar electronic payment he made on it a few days prior, which Citibank says it plans to hang on to for another 30 days.

I just found out by logging into the Citibank student loan website that my Citi student loan was transferred to another servicing company (Great Lakes) on 9/27. This would be four days after I made an online payment of $1000. The $1000 payment was deducted from my bank account on 9/23.

When I logged in to the Great Lakes web site and checked the transferred loan balance it did not include the $1000 payment that Citibank was now holding. The Citibank site shows the payment as pending.

I called the Citibank 800 number to find out what was going on as I had received no notice of the loans being transferred. The response was that they had just found out about the transfer on 9/24 and hadn’t had time to send out letters.

I asked about the payment which had already been debited from my checking account and was told that it could take up to 30 days for them to process the payment. I explained to the CSR that the payment had obviously already been processed as it had been debited from my checking account. I was told that they had to hold the payment for 30 days to make sure there were no problems with the payment. This would be the payment of $1000 against my now $0 loan balance.

I was told to contact Great Lakes to make sure there would be no problems with the funds when they finally processed them (30 days from now). I asked if I would be receiving accrued interest on the $1000 as it sits in Citibank for the 30 days while they make sure that the $1000 credit doesn’t have any “problems”. The response was that there would be no interest accrued on the funds.

I think when a bank grows so big that its own student loan division says it was caught off guard by the sale of its assets to another company, it’s time to move on.

Then again, there’s been a lot of shuffling of student loan operations between large financial powerhouses lately (due to changing regulations), so you can rest assured that your situation is not unique.

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  1. jshier says:

    Since they no longer have the debt, can’t you just ask for your money back?

    • DancesWithBadgers says:

      Probably add an additional 30 days.

    • rooben says:

      I’m sure, but they won’t give the money back until the 30 days pass. They won’t release funds if they think that you might get the check, and that withdrawal is reversed by the bank, with you ending with the original $1k you paid, and a check from Citibank.

      They have it stacked in their favor – they have the money already, so there is no incentive to return it, until they think they are clear.

      • Difdi says:

        And if they had mistakenly paid out $1000 to someone, who promised to have it back to them in 30 days (the delay being necessary to ensure there were no problems with the payment), said individual would be awoken at 3 am by a SWAT team kicking in his door to arrest the “bank robber”.

  2. skapig says:

    Money in limbo. Good times. Should we take bets on the transfer getting screwed up?

    The customer should have been given ample notice before the transfer and obviously Citibank’s process for it sucks.

    • BobOki says:

      Citibank?
      I’ll take 10 to 1 odds that they will promptly lose the payment as no payment could possibly be taken after the account was transferred to the new company, and they no longer have any records of that $1000 payment.

  3. Thyme for an edit button says:

    I wonder if there is some type of small claim you can file against Citibank for holding onto your money and not returning it. A lawsuit filing might light a fire under someone to process this more quickly.

    In other news… I have not had good customer service experience with Great Lakes (reps not knowledgeable about student loans, only able to do what “the computer” says.)

    Out of the frying pan and into the fire, I’m afraid, OP. Too much suck :-(

  4. donjumpsuit says:

    So,
    Interest rates on a savings account runs at about 0.9-2% at this point, making the interest on $1000 @ 2% is $1.50.

    • Pax says:

      More importantly – how much interest will accrue on the LOAN balance during those 30 days – when the balance should have been ZERO during that time?

    • Gulliver says:

      Loans that get transferred this way (student loans and mortgages have this happen a lot) get posted on the day they would have posted to the original. It just needs to work its way through both systems. You only accrue interest if there was a balance.

    • jvanbrecht says:

      Yes, now multiply that by a few hundred thousand loans (I pulled that number out of thin air, but I am sure they did not just sell 1 loan…) of which I am sure many made their monthly payment.. and that number could easily be a few hundred thousand dollars. That number might still be chump change to a bank of that size.. but its still stealing interest from people. Also, as someone else stated, what about the interest on the loans accrued by the new loan service company.

    • JollyJumjuck says:

      Pretty such the “C” in Citibank is pronounced with an “SH” sound.

  5. jessjj347 says:

    Grr. Every bit of the student loan process is terrible. Thank you so much for continuing to run these stories Consumerist.

  6. BrianneG says:

    I actually wouldn’t mind if Citibank sold my student loans. The next servicer can only be better than them.

    Two months ago I applied for autodebit because I was going to get an interest rate deduction. They told me to keep the account current because they didn’t know when the auto debit would actually go through for the first time. When I got my statement for the month of September, I immediately paid, more than the minimum payment. The payment was started on September 3 and the funds were deducted from my checking account on September 7. However, when I logged into online banking on September 27, I could see that the auto debit had also been pulled for the payment due on September 25. The payment was “processing” so it wasn’t really out of my checking account.

    I logged into Citibank’s system to see if it mentioned the pull on my account. Nope, there’s no tally of those payments being processed, just that my account was delinquent. Despite having made a payment and my balance due standing at $0, it said I was delinquent. I called to find out what the issue was and had to listen to the automated system tell me I was delinquent five times before I could get through to a real person. Both the initial representative and the supervisor had no idea why I was delinquent or anything else. Apparently, they took my money but didn’t really apply it to the amount due. Then because my bill was due on a Saturday, the autopayment didn’t arrive in time.

    I have a feeling they are going to pull the autodebit too late every single month and now it’s going to perpetually tell me that I am delinquent, even if I pay an additional payment at the beginning of the month.

    This is more inane than anything Sallie Mae ever did.

    • gaya2081 says:

      Hate to break it to you, but it will happen EVERY time your auto debit falls on a Saturday, or really any day that is a non-business day followed by another non-business day (holiday logistics-sunday before labor day, Thanksgiving Thursday/Black Friday etc).

      My student loan company sends the sharks on not just me, but my father who is also on the loan (Stafford loans) even though they only are suppose to contact me through my 2 phone numbers and email address. It amazes me that they cannot process payments over the weekend but their ‘collections’ department can call my father, whose phone number has NEVER been listed on the account on a Sunday multiple times. They then send me a late notice letter. When I call in they assure me it is something they cannot resolve in the system and that they backdate the draft to the correct day since they cannot auto-debit on non-=business days. As someone in the IT industry I laugh until I cry about this.

      • BrianneG says:

        the worst part is I have no control over the date of the autodebit. I would ask them to take it a few days or even a week early but they want to do it as late as possible, likely so that I pay the most interest.

    • NeverLetMeDown says:

      I get the same thing on my credit card. Every time the payment falls on a Saturday, I get hit with a late fee on Sunday, which automatically disappears by Tuesday. I don’t get hassled by them, but it’s still kind of strange.

  7. NeverLetMeDown says:

    Accrued interest on $1k at Citi’s short-term borrowing cost of 22bps (Fed Funds Rate) would be 18 cents.

    So long as (1) the payment is actually applied, and (2) it’s applied based on the correct date so YOU aren’t being charged interest on that $1000 for the month it takes them to close it out, I wouldn’t worry about it.

    • jenl1625 says:

      But he WON’T get credit for the actual date of that payment. He paid Citibank $1,000. Citibank sold the loan, but held the money. In 30 days, theoretically, Citibank either gives OP back the $1,000 or hands it on to the new loan company. In either case, the new loan company will credit the $1,000 when *it* gets the money, not when Citibank got it…

  8. SenorGrub says:

    This happened to me. I sent in a $1000 payment and they kept telling me it was for the other Student Loan I had and I kept telling them to credit the overdue on. Finally the overdue one went to collections (which at that point too late) so I told them to credit the $1000 to the one that was ok. Well, two months of “We are transfering it” they sent the loan to collections. A month later they transfered the money to the collections agency. For the record they had my money 6 months before anything happened with it. That was Citibank for you, err, excuse me, the Student Loan Corporation.

  9. PunditGuy says:

    Never mind the interest. Break out the loan agreement and see if there’s a clause about how much notice they have to give you before a transfer of the debt to another company.

  10. mszabo says:

    I’ve never had a student loan transfered but have had several home mortgage transfers. I’m not sure the OP has anything to worry about here. It’s up to Citibank and the New Bank to get the money transfered and post the payment to your loan on the correct date.

    With my mortgage I believe I always got a several month grace period where I could still send checks to the old bank, even though they were no longer servicing the loan.

    It sounds like Citibank has yet to mail you an official document stating the loan has been transfered, without that Citibank still owns the loan and is responsible for handling payments.

    So I’d wait a month and see what the first statement from the new bank says. If the balance is wrong yell at them.

  11. selkie says:

    My student loans were US Department of Education direct loans, and I seriously never had an improper payment credit or bad customer service experience with them. Considering the regular horror stories I hear of bank-issued sbusidized student loans, I just don’t get why there was such a fuss when the USDE moved to hold and service all of that type of loans when they’ve got a far superior product to what the banks had been offering.

  12. oldwiz65 says:

    Plain and simple; Citibank hates customers.

  13. dush says:

    just think if everyone closed their citibank accounts tomorrow. maybe that would wake them up to better customer service.

  14. DanKelley98 says:

    “we were caught off-guard about our decision to sell your loan to another company. sorry, not our fault.”

  15. Tom Foolery says:

    If this were a mortgage, selling the loan (or changing the servicer) without proper notice to the customer would be a big no-no, and involve fines. Also, the prior lender is required to forward any unapplied funds to the new lender without any penalty to the customer. Don’t know if this applies to student loans, but i’d guess there are similar rules in place.

  16. TasteyCat says:

    I had this problem when Citizens Bank acquired Charter One, and I had about 6 months left on my auto loan, which had a spotless payment record prior to the acquisition. They couldn’t find my payment after cashing it, then proceed to threaten to repo my car. I sorted this out by just making an extra payment while waiting for things to get cleared up, which eventually did happen. Years later, I noticed they were still reporting 30 and 60 day lates on my credit report and hence my perfect payment record was reporting under the derogatory items category, but they agreed to remove them without hassle.

  17. Mina_da_mad_child says:

    Citibank can suck a fat one. I got a full scholarship for my masters in Europe. When I emailed them about deferring my student loans, they said that since my school doesn’t participate in the student loan program, they aren’t able to help me. Basically, since I can’t get further into debt with them, they want me to start making payments.

    Since the US and my country do not have any tax agreements, I find it hilarious that they want to make me less likely to repay my debt instead of more. Oh and did I say that they students here get paid to got to college instead of the other way around.

  18. muffingal says:

    Citibank is the worst for student loans. I was glad that I consolidated as soon as I realized it.

  19. muffingal says:

    Citibank is/was the worst for student loans. I consolidated as soon as I realized it.