CFPB Fines Wells Fargo $3.6 Million for Illegal Student Loan Servicing Practices
By Allie Bidwell, Communications Staff
The Consumer Financial Protection Bureau (CFPB) on Monday took action against Wells Fargo for illegal student loan servicing practices, including breakdowns in providing information to borrowers, charging borrowers illegal fees, and failing to update inaccurate credit report information.
The CFPB has ordered Wells Fargo to provide $410,000 in relief to borrowers and pay a $3.6 million civil penalty to the CFPB, in addition to improving its consumer billing and loan payment processing practices.
“Wells Fargo hit borrowers with illegal fees and deprived others of critical information needed to effectively manage their student loan accounts,” said CFPB Director Richard Cordray, in a statement. “Consumers should be able to rely on their servicer to process and credit payments correctly and to provide accurate and timely information and we will continue our work to improve the student loan servicing market.”
The CFPB said that Wells Fargo gave borrowers misinformation about their payment options, among other dysfunctions in their servicing practices. The CFPB found that Wells Fargo processed borrowers’ payments in a way that maximized fees and did not disclose to borrowers how it allocated their payments across multiple loans.
“Specifically, if a borrower made a payment that was not enough to cover the total amount due for all loans in an account, the bank divided that payment across the loans in a way that maximized late fees rather than satisfying payments for some of the loans,” the CFPB said.
The CFPB also found that Wells Fargo misrepresented the benefits of making partial payments, charged illegal late fees, and failed to update and correct inaccurate information that reflected poorly on borrowers’ credit reports.
Publication Date: 8/23/2016
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