February 21, 2012
Troops get $2.3M in Citibank student loan deal
A Minnesota National Guard officer has won a $2.3 million settlement for herself and thousands of other troops in a class-action lawsuit against Citibank and The Student Loan Corporation.
Maj. Lyndsey M.D. Olson challenged the way Citibank administered the student loans of service members who were entitled to an interest-rate reduction to 6 percent under the Servicemembers’ Civil Relief Act. She gets about $7,500 of that $2.3 million as the representative plaintiff in the lawsuit; the rest goes to other service members identified as being affected by the alleged actions.
The plaintiff’s attorneys are awarded fees of $650,000, so Citi’s tab will be closer to $3 million. The attorneys’ fees are separate from the $2.3 million being paid to service members.
The lawsuit estimated the number of service members affected to be “in the thousands.” An attorney for Olson and a spokesman for Citibank, bound by the settlement agreement to keep mum, declined to specify how many troops are affected. The lawsuit was filed in the U.S. District Court for the district of Minnesota, and the settlement was announced Sept. 5.
The amount each service member receives ranges from a minimum of $50 to more than $580, according to notices sent to service member informing them of the lawsuit. Citibank denied the allegations, and the court made no ruling about the merits of the allegations.
Olson began her active duty in 2005. She later informed Citibank (New York State) of her active-duty status, asking to have her interest rate on her student loan reduced to 6 percent. The Servicemembers’ Civil Relief Act requires lenders to reduce interest rates to 6 percent on loans that were entered into before a service member goes on active duty, as long as the service member provides notification and is materially affected by being called to active duty.
Citibank informed Olson that in order to have her interest rate reduced, her loan had to be placed into forbearance. When lenders put student loans into forbearance, the borrower stops making payments or makes reduced payments for a period of time, but interest continues to accrue. Under the SCRA, additional interest does not accrue. Olson contended that the bank charged her more than 6 percent interest and compounded that extra interest over the remaining terms of the loan.
Service members who qualify to be included in the lawsuit were those who, between July 13, 2004, and Nov. 30, 2011, were in military service and had one or more loans that qualified for the SCRA interest rate reduction and had their student loan placed into forbearance, and had provided written notice to Citibank of their military service.
“The parties are pleased with the settlement,” said Vildan Teske, lead attorney for Olson. Teske is the contact for service members in the class action lawsuit, at email@example.com.
The lawsuit was filed against Citibank (New York State), Citibank N.A. and the Student Loan Corporation. Citibank (New York State) was merged into Citibank N.A. in 2003. Citibank largely exited the student loan business in 2010 by divestiture, according to Citibank spokesman Mark Rodgers. The bank sold its interest in the Student Loan Corporation.
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