Alleged Illegal Student Loan Practices Cost Wells Fargo $4 MillionAugust 23, 2016 | By: Srividya Kalyanaraman
Without admitting or denying any of the CFPB’s findings, Wells Fargo has consented to a $3.6 million fine over alleged unfair penalties imposed on certain student borrowers. They must pay another $410,000 to cover consumer injuries.
The South Dakota-based Education Financial Services is a division of Wells Fargo that lends to approximately 1.3 million consumers in all 50 states.
“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,” CFPB said in a statement.
The bank also misled borrowers on partial payments, charged certain consumers late fees for payments made on the last day of the grace period and also failed to correct inaccurate information on credit reports of borrowers.
Reuters quoted a Wells Fargo spokesperson saying that the settlement revolves around procedures that were retired or improved many years ago and impacts a small number of customers.
The bureau also required the bank to provide consumers with disclosures explaining how the bank applies and allocates payments and correct inaccurate information on borrower credit reports.Last modified: August 24, 2016
Srividya's work has appeared in publications like Money magazine, Advertising Age, FirstPost and The Economic Times. She has also dabbled in business intelligence solutions, and holds a Masters degree in Business and Economic Reporting from NYU.