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An investigation by the Consumer Financial Protection Bureau (CFPB) has uncovered the company wide use of illegal practises in dealing with student loans at Citibank. This is another damaging blow to the reputation of the banking industry, which took a major hit to its reputation during the housing crash in 2007. It’s disappointing that one of America’s largest financial institutions would be involved in a scheme targeting a group of people already struggling with their finances.

The CFPB found a number of irregularities during their investigation. According to their findings, Citibank had been charging late fees they weren’t entitled to, incorrect interest, they requested monthly payments that were too high, and withheld information about tax deduction benefits. The bank hasn’t had much to say publicly about the situation, but the fact that they are paying the fines without dispute speaks volumes.

Lessons Not Learned

What makes the decision of Citibank executives to allow these illegal practises so surprising is that it appears to be nothing but a policy of corporate greed. The bank was one of the hardest hit by the subprime mortgage crisis and it received one of the largest financial bailouts in American history in 2008 just to keep it afloat. That makes the use of misleading techniques with student borrowers so hard to understand.  Clearly, Citibank didn’t learn the lessons of their past.

At one point, Citibank was considered the flagship of American banking and it still has a presence in almost 100 countries. It’s too early to tell how this latest development will affect the banks status and bottom line moving forward, but the signs aren’t encouraging. This is a bank that seems to have lost its way a little bit.

Not Unprecedented

Citibank isn’t the only bank that’s found itself at the center of controversy for misleading investors and borrowers. Just last year Bank of America agreed to pay $430 million in a settlement for the misuse of customer’s money. Between 2009 and 2012, the bank had been using customer cash to fund their own investments without their knowledge or permission. This was a serious breach of trust and another example of a major American bank with questionable policies.

America has thousands of banks, both big and small, so it’s probably not a major revelation that some of them may behave unethically. What is surprising is that these practises are taking place at America’s largest financial institutions. There’s a real danger that these incidents could undermine the foundation of the system if they continue.