That’s according to the Consumer Financial Protection Bureau, which announced on Monday (Aug. 22) it took action against Wells Fargo, charging the bank engaged in allegedly illegal private student loan servicing practices that increased the costs for borrowers and unfairly penalized certain borrowers. The CFPB said it identified breakdowns throughout the servicing process at Wells Fargo, including failing to provide important payment information to consumers, charging consumers illegal fees and failing to update inaccurate credit report information. The CFPB’s order not only requires Wells Fargo to improve its consumer billing and student loan payment processing practices but also to provide $410,000 in relief to borrowers and pay a $3.6 million civil penalty to the CFPB.
“Wells Fargo hit borrowers with illegal fees and deprived others of critical information needed to effectively manage their student loan accounts,” said CFPB Director Richard Cordray in a press release announcing the charges. “Consumers should be able to rely on their servicer to process and credit payments correctly and to provide accurate and timely information, and we will continue our work to improve the student loan servicing market.”
According to the order issued by the CFPB, Wells Fargo failed to provide the level of student loan servicing that borrowers are entitled to get under the law. The breakdowns in the process resulted in thousands of student loan borrowers encountering problems with their loans or receiving misinformation about their payment options. The practices violated the Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits banks from engaging in unfair and deceptive acts and practices. The order comes just a few weeks after Wells Fargo announced a partnership with Amazon in which Amazon Prime Student customers get a break on their interest rate when they take out a student loan with Wells Fargo.