Caution! Politics Ahead: Amazon Breaks Student Loan Ties With Wells Fargo
Was it easy come and easy go for the Amazon-Wells Fargo partnership?
Not long after the two companies signed a multiyear contract to market private student loans to Amazon Prime Student subscribers, the ecommerce giant retreated after finding itself in a political soup.
Caught in the crossfire between the two bastions of private and federal student loans, the partnership ended rather abruptly after The Institute for College Access & Success, or Ticas, a nonprofit focused on higher education and student-loan issues called the partnership an attempt to dupe students.
“This is the kind of misleading private loan marketing that was rampant before the financial crisis. It is a cynical attempt to dupe current students who are eligible for federal students loans with a record low 3.76% fixed interest rate into taking out costly private loans with interest rates currently as high as 13.74%,” said TICAS in a statement issued last week, “Amazon and Wells Fargo are trumpeting a 0.5% discount while burying the sky-high rates on these private loans and without noting that they lack the consumer protections and flexible repayment options that come with federal student loans.”
This was exacerbated by the CFPB’s allegations that the bank engaged in illegal student loan practices — by misleading borrowers on partial payments, charging certain consumers late fees for payments made on the last day of the grace period and failing to correct inaccurate information on credit reports of borrowers. Wells Fargo, the second-largest private student lender neither denied nor admitted to the charges but however, settled the matter for $4.1 million.
The partnership was an one up for private student lending especially against growing private entrants like SoFi and CommonBond. With it being undone, what’s next?Last modified: September 7, 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.