Consumer complaint received 2023-10-04
Company: DISCOVER BANK
State: NC
Product: Student loan
Sub-product: Private student loan
Issue: Dealing with your lender or servicer
Sub-issue: Trouble with how payments are being handled

Complaint:
Legislation should prohibit Discover Student Loans and their representatives, XXXX XXXX XXXX, from violating the rights and livelihood of individuals who turn to them for financial assistance with genuine intentions. 

Over the past decade, my family has faced financial challenges trying to meet the sizable monthly payments on two student loans. My daughter and son are the borrowers, and my husband and I are the cosigners. We're committed to fulfilling our financial obligations, but Discover has made this unattainable. We have lodged two complaints with the Consumer Financial Protection Bureau, reached out to relevant District Attorney 's offices, and directly contacted Discover 's leadership. Throughout this period, we've personally encountered tactics from Discover Student Loans that we view as infringing on our rights and indicative of predatory lending practices. Around two years ago, we had no choice but to default on these unmanageable loans. This decision was not made lightly, as we knew it would further damage our already compromised credit scores and hinder our ability to accumulate assets. Despite our plight, Discover showed no willingness to negotiate or take steps to ameliorate the situation. 

In XX/XX/XXXX, Discover filed civil suits against us, initiating another phase in our contentious financial struggle. We enlisted the help of a student loan attorney because XXXX XXXX XXXX, acting on behalf of Discover, refused to negotiate with us and demanded the full balance either upfront or in five-year installments. Our attorney managed to secure a reduced repayment rate of {$2400.00} per month for the next five years for both loans. Discover stipulated that missing even one payment would nullify the settlement agreement. Additionally, since Discover will consider the loans unsettled until the last cent is paid, both the students ' and cosigners ' credit scores will be negatively impacted until the final payment is made in five years, effectively holding our credit hostage over that duration of time. This severely limits our ability to make any credit-based transactions like buying a car or home, or even renting, while Discover continues to collect {$2400.00} monthly from us for the next five years. 

To complicate matters, the timeline for finalizing this settlement was unnecessarily tight. When the proposal was finally on the table on XX/XX/XXXX, we were informed that the first payment had to be wired before the month 's end ; otherwise, the deal would be off. Despite this tight deadline, there were multiple inaccuracies in the details they provided, such as wrong account numbers and addresses, misrepresentation to the District Court, inaccurate paperwork, etc., which we had to scramble to correct. Inaccuracies on DiscoverXXXX  part included : After making the initial mandated payment before the tight deadline, we discovered Discover/XXXX had omitted an entire account from the agreement. This missing information was sent later via regular mail, contrary to the expedited faxing they used for the rest of the account details. The omitted account was subsequently included in the settlement, which raised the agreed-upon amount by nearly {$4000.00} and increased our monthly payments by {$64.00}. Despite this oversight on their part, there were no apologies or accommodations made, although they held us strictly accountable to the original agreement payment deadline. 
We continuously received notifications from the XXXX XXXX XXXX XXXX in North Carolina regarding our selection for random arbitration. We reached out to XXXX XXXX XXXX, XXXX XXXX, notifying her of our ongoing settlement agreements, which essentially serve the purpose of arbitration. This correspondence also included our attorney and XXXX attorneys. However, XXXX XXXX stated she needed verification from the plaintiff 's attorneys. Despite having communicated our settlement agreement, we were still provided with an arbitration date. Consequently, our attorney requested XXXX to update the courts. Yet, we were surprised when we received another notification of impending arbitration for a second case. I promptly communicated with XXXX XXXX, referencing all XXXX case files that had been settled. She acknowledged being aware of the settlement for the first case during the arbitration hearing that occurred on XXXX XXXX. It's perplexing that the court proceeded with arbitration for an already settled case. It's worth noting that we hadn't even provided the necessary documents, which were due two weeks prior to the arbitration date. Surprisingly, no one followed up on these missing documents. It raises questions about whether this arbitration was merely a procedural formality to ensure certain individuals received compensation. It seems like a misuse of taxpayers ' funds and a dubious system where individuals might be compensated without rendering actual services. Will this same situation arise for the other three Discover cases that we've already settled? 
On XX/XX/XXXX, our lawyer updated me about a conversation he had with XXXX the day before. They apparently did not receive our daughters payment made in XXXX. It's noteworthy that this is the same account for which they had given the wrong account number and still proceeded with an arbitration hearing. When we got the written agreement through mail for notarization back in XXXX, our attorney had immediately informed XXXX about the error in our daughters account number. At that time, they assured him they would ensure the funds were directed to the right account. However, they now claim not to have received the payment. It's important to note that both childrens payments for XXXX were sent together, via BoA wire, as a single transaction to expedite the process and avoid any penalties. The total amount included the due amounts for both accounts, clearly specifying both account numbers. From XXXX onward, we've made individual payments for each account. On XX/XX/XXXX, our lawyer found himself reiterating the same information to XXXX that he had shared back in XXXX. 
During the conversation our lawyer had with XXXX on XX/XX/XXXX, XXXX mentioned that while they had received the notarized settlement copies for the children, they hadn't received them for the cosigners. However, the documents provided to us were specifically set up for notarization for our children only, not for the cosigners ( an example of this is available for reference ). A XXXX XXXX will only notarize a document for the individuals explicitly named on that document. XXXX suggested we use the same documents they initially sent. I advised our attorney to ask XXXX to provide us with the appropriate documents so that both my husband and I can duly get them notarized. 

These errors occurred as DiscoverXXXX maintained their demand for a turnaround of less than one week for the first payment. The entire process has been marked by errors and omissions, but also penalties, consistent with our past decade-long experience with Discover. Nonetheless, they continue to wield disproportionate power over our lives, unapologetically impairing our financial well-being and hindering our progress. Holding our credit profile XXXX for 5 years while they received {$2400.00} per month should be illegal. 

I know that Discover Bank has received attention from the CFPB ( Consumer Financial Protection Bureau ). I know that politicians such as XXXX XXXX, XXXX XXXX, and XXXX XXXX are also spearheading legislation to stop predatory student loan lenders. XXXX XXXX created a bill called The CFPB Student Loan Integrity & Transparency Act of XXXX, which " would strengthen the oversight abilities of the Consumer Financial Protection Bureau 's ( CFPB ) student loan ombudsman, the top federal official responsible for defending the interests of student borrowers struggling to repay their loans. '' " This officials oversight capabilities were undermined when CFPB Acting XXXX XXXX XXXX closed the only federal office solely dedicated to protecting student loan borrowers : the Office of Students and Younger Consumers. '' I know the CFPB also filed a lawsuit against a company with the names " College Financial Advisory '' and " Student Financial Resource Center '' for " conducting a nationwide operation that deceived students and their families into paying a fee in exchange for an illusory student financial aid program. '' Data shows that Student debt negatively impacts the economy and continues to Reinforce the XXXX wealth gap. '' Regardless of the incomes they make after graduation, XXXX households carry more student debt, which pushes down their creditworthiness. Unsurprisingly, then, XXXX people with a college degree have lower homeownership rates than white high school dropouts. '' " There is also a XXXX disparity in student borrowing that many experts say is problematic and the result of decades of systemic discrimination. '' ( XXXX on XXXX XXXX ). Then there are politicians such as XXXX XXXX who plan to put college legislation in place that will prohibit spending on diversity, equity, and inclusion ( DEI ) initiatives to make the atmosphere unpalatable to minorities and serve as another deterrent to the progression of marginalized people. 

While most of the impact of predatory lending lands on POCs ( People of XXXX ), all students who enter this system are preyed upon. Our family has over 10 years worth of experience with Discovers cruelty and unethical behavior. 

While regulatory scrutiny and fines from the CFPB have cast a spotlight on some of Discover Bank 's questionable practices ( as well as those of other lenders deemed predatory ), pinpointing the exact elements of their lending process that are illegal can be difficult. This is because their approach is often indirect and subtle, deliberately designed to maximize loan amounts at the expense of borrowers ' rights. While many individual aspects of their operations might not be explicitly illegal, their collective behavior can facilitate outcomes that are. 

Discover 's tactics often seem calibrated to set students and their cosigners up for failure from the outset. For instance, their use of forbearance and hardship programs often lacks full disclosure regarding how these options will affect monthly payments and overall loan amounts, luring borrowers into a false sense of relief. Instead of offering extended loan term programs that would lower monthly payments while increasing the loan term, they opt for forbearancewhich more quickly inflates the overall loan amount. They have also been implicated in a class-action lawsuit related to DACA, alleging discrimination in mortgage and student loans. 

In our personal experience, Discover had to correct inaccurately high interest rates and statement amounts for both of our children, adjustments that were made only after being flagged by the CFPB. Yet, these are not isolated incidents ; they represent broader systemic issues affecting a wide swath of borrowers, particularly those who are marginalized. The compounded effect is the widespread destruction of creditworthiness and a vicious cycle of financial disempowerment. 

While the CFPB has begun to address these problems, much remains to be done, especially considering the prevalence of predatory practices beyond just Discover. This is just the tip of the iceberg, but it's encouraging to know that regulatory agencies are watching closely. 

When a borrower opts for student loan forbearance, the aim is to temporarily suspend monthly payments. The terms may vary based on the lender and the loan type, and it's often the case that interest continues to accumulate during this period. The purpose of forbearance is to offer a short-term financial respite for borrowers going through economic difficulties. 

When our children sought more manageable monthly payments, Discover was quick to suggest forbearance, fully aware that this would result in higher monthly payments down the line, effectively trapping our children in a financial downward spiral while increasing Discover 's own profits. During my son 's final year of college, when he still had XXXX credit hours remaining, Discover insisted that he begin repaying his student loan. Despite his efforts to maintain interest-free deferment until he completed his education, Discover pushed for forbearance. We all fought strenuously to reverse this decision. 

Discover didn't just encourage our children to opt for forbearance and their Hardship Assistance Program when they had a late monthly payment ; they did so when our children merely expressed difficulty with the existing payments. Because Discover fixed the loan term at 10 years, the deferred payments and interest accrued during the forbearance and hardship periods were later added to the principal. This inflated the monthly payments since the loan term remained unchanged. For both of my children, these strategies, combined with high interest rates, would have substantially inflated the loan amount compared to what was originally disbursed. 

Our Experience with Discover Student Loans : Discover, aware of the typical salary a graduate can expect in relation to the loan amount, commits students to a 10-year loan term and requires a cosigner. 
Both the student and the cosigner undergo credit assessments for the loan, and we are informed that the interest rate range will be between 6.00 % and 9.00 %. Despite the cosigner having a high credit score in the upper 700s, the student is assigned an interest rate of 8.99 %. When questioned about the high rate and why the cosigner 's strong credit score wasn't considered, we are told that the student is the main borrower, not the cosigner. According to XXXX XXXX XXXX XXXX, adding a cosigner with a strong credit score can substantially lower the interest ratepotentially by XXXX  percentage points or more. For example, a borrower with a credit score of XXXX could expect an interest rate between XXXX %, but adding a cosigner with a score of XXXX could reduce that rate to between XXXX %, resulting in significant savings. However, in our case, the student was given the maximum interest rate available at the time. ( This should be considered unethical, especially given the contradictory information provided later when the loan was due about the cosigner 's role as a " co-borrower. " ). 
Right after the student graduates, Discover reaches out to the cosigner for repayment, even before any payments are overdue. This approach raises questions about whether Discover had already anticipated that the student would fail to make payments. When queried about contacting the cosigner first, Discover labels us as " co-borrowers. '' Ironically, we weren't considered co-borrowers during the loan assessment, which would have potentially lowered the interest rate, but we suddenly became co-borrowers when it was repayment timedespite our strong credit scores having no impact on the initial rate. 
The student receives a staggering monthly bill of {$1200.00}, which is hard to manage on a $ XXXX salary. Discover suggests forbearance or hardship programs as a temporary fix. The representative glosses over important financial implications of forbearance, leading the student to opt for it without fully understanding its long-term impact. Six months later, the student is shocked to find out that monthly payments have increased, yet is advised to enter another round of forbearance or the Hardship Assistance Program, thereby exacerbating the situation. 
The downward financial spiral starts almost immediately, as each forbearance period renders the loan increasingly unmanageable for both the student and cosigner. Their credit scores also suffer due to late or missed payments. 
Attempts to secure a XXXX consolidation loan through Discover failed because of low credit scoreswhich have been damaged by the student loansas well as the high total amount owed in relation to income, further worsened by repeated forbearance periods. 
Efforts to consolidate the student loans with other lenders also hit a wall due to poor credit and high loan-to-income ratios, which have been worsened by the initial loans and the forbearance cycles. 
Both the students ' and cosigners ' prospects for stable employment and financial growth are compromised, as they struggle to balance loan repayment, daily living expenses, and retirement planning, all of which have been negatively impacted by Discover 's questionable practices. 
As loan payments fall further behind, both students and cosigners experience harassment, misinformation, credit reporting errors, and other forms of mistreatment, violating their right to fair and dignified treatment. 

Discover seems to understand the majority of students turning to them for loans are marginalized or underprivileged. Even when the loan was not in default, we were subjected to relentless harassment. Discover even unethically suggested that my children deliberately miss payments to exhibit financial hardship, employing strong-arm tactics such as bullying, credit damage, and falsehoods to extract money that arguably shouldn't have been due in the first place. 

Though attributing high interest rates and dismissing cosigner credit scores might be within legal bounds, it doesn't make it ethically sound. This, coupled with the dubious forbearance and hardship program policies, sketches out a blueprint of predatory lending that's genuinely unprecedented. Discover might try to pass the buck to its Collections department for any 'illegal ' activities, but it is its foundational policies that set up the damaging cycle leading to such harassment in the first place. 

Our daughter received two compensation letters from Discover, one on XX/XX/XXXX, and another on XX/XX/XXXX, seemingly propelled by CFPB 's scrutiny. However, this only occurred after she had defaulted, and the 'compensation ' was added back to her outstanding loan. My son also received a {$59.00} check from the CFPB on XX/XX/XXXX, for a related matter, along with four other letters from Discover acknowledging incorrect interest rate charges. 

Within our household, both of our XXXX children, despite being XXXX years apart in age, have fallen prey to these tactics. This experience illuminates the systemic targeting of vulnerable populations like ours and others struggling financially. 

Discover leverages this business model to infringe on the rights of borrowers, systematically inhibiting upward mobility for entire generations, including Millennials and XXXX XXXX, particularly those of XXXX. They gamble that few will have the courage or resources to oppose a financially robust institution backed by influential politicians. When similar outcomes manifest across millions of students, it's not the individual at faultit 's the predatory system they're ensnared in. 

Request from Discover Student Loans : Release the hold on our credits, and dismiss all litigations now that we have an agreed-upon and executed settlement. 

Included in the attachments : 1. Signed authorization letters 2. Civil Summons from Discover for all four file numbers 3. Settlement information 4. Arbitration documents 5. Requests for notarization documents sent by Discover/XXXX 6 . Notice from Discover of interest rate errors and applicable refunds ( does not account for high interest rates assigned upon inception of loans with high credit rating cosigners )

Company response to consumer: Closed with explanation