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.

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.

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