Wells Fargo (WFC) was fined $3.6 million and will have also have to provide $410,000 to thousands of student loan borrowers the bank deceived or treated unfairly, the Consumer Financial Protection Bureau said Monday.
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The bureau said it identified breakdowns throughout Wells Fargo’s servicing process, including failing to provide important payment information to consumers, charging illegal fees and failing to update inaccurate credit report information.
In a study released past year, the bureau estimated that a quarter of the 41 million Americans with student loans were either delinquent or in default on more than $175 billion in student debt collectively. Before then, borrowers were given a coupon for each loan. 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.
The problem, according to the CFPB, was that borrowers didn’t know about these procedures. Billing statements did not make it clear that partial payment could be counted toward paying down student debt. These measures are created to help the bank reduce the number of delinquent loans in an account as well as the number of late fees, improve consumer billing disclosures, correct errors on credit reports and also pay a $3.6 million penalty to the CFPB’s Civil Penalty Fund.
“Wells Fargo hit borrowers with illegal fees and deprived others of critical information needed to effectively manage their student loan accounts”, CFPB Director Richard Cordray said in a statement.
The CFPB has signaled its intent to more closely regulate student-loan servicers and has made it a priority to take action against companies engaged in activities that it sees as illegal.
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The bank did not specify the number of borrowers affected, but it has approximately 1.3 million student loan borrowers across the 50 states, according to the CFPB.
