Wells Fargo must pay $ 3.6M fine for illegal student loan practices
Wells Fargo must change its practices and pay a $ 3.6 million fine for actions that federal consumer protection officials say misled student loan borrowers and resulted in some paying unnecessary fees.
In the order filed Monday leveling the penalty, the Consumer Financial Protection Bureau said the bank acted illegally, charging on- time payers with late fees, failed to inform borrowers of steps they could take to minimize fees and left credit report errors uncorrected.
“Wells Fargo hit borrowers with illegal fees and deprived others of critical information needed to effectively manage their student loan accounts,” bureau director Richard Cordray said in a state- ment. “Consumers should be able to rely on their servicer to process and credit payments correctly and to provide accurate and timely information.”
According to the bureau, Wells Fargo left borrowers in the dark about how it divided single payments among their multiple loans and did not make borrowers aware that it was up to them to say how payments were to be allocated, which led to the possibility of unnecessary late fees. Billing statements did not make it clear that partial payment could be counted toward paying down student debt. The bank illegally tagged some borrowers with late fees though payments had been made as scheduled, and when it gave wrong information to credit reporting entities, it did not correct them.
Wells Fargo said in a statement it already has overhauled the problematic processes cited in the order, and while disagreeing with the charges, it will address the bureau’s concerns to put the matter behind it.
According to the order, Wells Fargo must pay at least $ 410,000 to reimburse borrowers for wrongfully charged late fees. The bank must also correct credit report errors, do a better job explaining how consumers can allocate their payments and use partial payments to pay what is due on as many loans as possible.
The actions taken against Wells Fargo are designed to put a dent in the more than $ 110 billion in student loans that are in default, the bureau says.