Wells Fargo was cited $4 million Monday for illegal private student loan servicing practices that cost student borrowers more money in fees, leading to a host of solutions the bank must implement to improve its practices.
Most of the money to be paid by Wells Fargo through the order by the Consumer Financial Protection Bureau goes to the CFPB with a $3.6 million penalty. The bank must provide $410,000 in relief to borrowers.
The federal agency found that the bank failed to provide important payment information to consumers, charged illegal fees, and failed to update inaccurate credit report information.
How Wells Fargo erred
The consent order includes a number of things Wells Fargo must do, starting with providing at least $410,000 to compensate consumers for illegal late fees.
To get their refund for such fees, students shouldn't have to do anything. The refunds include payments for the bank failing to disclose its payment allocation practices across multiple loans in a borrower's account, as well as for not informing consumers that they could instruct the bank to allocate payments in a different way.
Refunds will also happen for illegal fees that were charged because the bank didn't combine partial payments made in the same billing cycle, and for fees improperly charged when borrowers made a payment on the last day of the grace period.
Misinformation on partial payments
As any borrower can do with a loan, a partial payment can be made — though they'll likely have to pay a late fee. Still, a partial payment will help a borrower avoid some interest charges, and is better than no payment at all.
For students with multiple loans from a bank, a partial payment can satisfy at least one loan payment in an account, meaning they'd be late for other loans but not the one where the partial payment was made. ...continue reading