The Consumer Financial Protection Bureau (CFPB) has charged Wells Fargo with engaging in illegal practices while servicing private student loans. Under a consent order, Wells Fargo will pay $3.6 million as a civil penalty, refund at least $410,000 to borrowers, and make improvements to their private student loan servicing policies.
The CFPB alleged the following illicit conduct by Wells Fargo:
- Charging illegal late fees on private student loans.
- Processing partial payments in a way that maximized late fees.
- Failing to disclose to borrowers how payments are to be allocated.
- Failing to inform borrowers that the borrower can inform the bank as to how they want a specific payment applied.
- Misinforming borrowers about the benefits of partial payments, thereby possibly discouraging borrowers from making partial payments which could have potentially satisfied the required monthly payment on some of the borrower’s accounts.
- Failing to fix credit reporting for student loans with incomplete or inaccurate information, causing adverse credit effects.
In addition to the civil penalty and refunds, Wells Fargo must improve it's private student loan servicing practices, including:
- Applying partial payments in a way that satisfied the monthly amount due for the most amount of loans.
- Providing enhanced disclosures within the borrowers billing statements to explain their standard payment allocation method and instructions for the borrower to specify their own intended allocation.
- The bank must delete adverse credit reporting information for student loans which have been reported incorrectly.
Wells Fargo bank services approximately 1.3 million student loan borrowers. They deny the allegations made by the CFPB, but have consented to make changes to their policies and provide redress.
The Law Office of Simon Goldenberg PLLC provides assistance to distressed borrowers. Learn more about wells fargo student loans.
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