(New throughout, adds details of case)
WASHINGTON, Nov 21 (Reuters) - The U.S. Consumer Financial Protection Bureau (CFPB) said on Tuesday it had ordered Citibank to pay $6.5 million for allegedly harming borrowers with student loan servicing failures.
The agency said it ordered Citibank to end illegal loan practices and pay $3.75 million in redress to consumers and a $2.75 million civil penalty.
Mark Costiglio, a spokesman for Citi, said "we are pleased to resolve this matter."
Student debt can carry tax benefits but Citi failed to guide customers through paperwork that could lead to tax savings, according to the agency.
Some clients were also made to pay late fees and interest when they were eligible to defer such loan payments, said the agency.
Citi shed $32 billion of its student loan investments in 2010, selling them to Discover Financial Services.
Citibank has roughly $1.4 trillion in assets, according to the Federal Reserve. (Reporting by Tim Ahmann. Editing by Sandra Maler and David Gregorio)