It has been a busy week for the Consumer Financial Protection Bureau, which first unveiled a proposal to end mandatory arbitration in the financial services world, and then it was reported that the CFPB has been investigating Wells Fargo over the lender’s student loan servicing business.
The Wall Street Journal reported Thursday (Oct. 8) that the bureau’s investigation into Wells Fargo has been ongoing since late last year, according to unnamed people familiar with the matter. The genesis of the investigation can be traced to what WSJ termed a “routine examination” of the bank — though the exact nature of the probe, and even what CFPB has been probing, is not yet clear. Nor is it clear yet what actions, if any, may result. But, added the publication, the bureau’s examinations usually have zeroed in on payment processing and what efforts servicers take to work with distressed borrowers. As might be simply described, the servicers are generally the “contact point” for borrowers as they pay loans; the servicers receive the payments themselves from the borrowers and also work on delinquencies and other problems. Among the practices that have been criticized by the CFPB: inept paperwork and practices wherein payments are postponed but are added to the balances outstanding.
[bctt tweet=”The CFPB has said it will take action against illegal student loan servicing practices.”]
The CFPB, WSJ noted, has been “ramping up” student loan servicer investigations and has said it will take action against illegal servicing practices. The industry is a rather consolidated one, with fewer than a dozen major players, according to WSJ. And Wells Fargo is the second largest private student loan originator by volume, having exited federal student loans four years ago. The first public action by the CFPB came three months ago against Discover Financial Services. And the CFPB, in tandem with several state attorneys general, has been looking into Navient Corp., which is the largest student loans servicer in the United States.
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