Wells Fargo fined $3.6 mn over charging some student loan borrowers illegal late fees
23 August 2016
Wells Fargo has been fined $4 million for charging some of its student loan borrowers illegal late fees. The lender agreed to pay a penalty of $3.6 million to the Consumer Financial Protection Bureau, according to the settlement agreement.
It would also need to set aside $410,000 to refund customers who were charged illegal fees between 2010 and 2013.
With 1.3 million student loan customers, Wells Farg (WFC) is among the biggest private student loan lenders in the country with 1.3 million student loan customers.
Families typically approached private lenders after a student had fully used up federal government loans and still needed help footing the college bill. Federal loans typically carried lower interest rates than private loans, offered more consumer protections, and are available to all students regardless of their family's financial situation.
According to the CFPB, the bank charged illegal late fees to customers who made payments on the last day of their grace period. Borrowers typically, enjoyed a six-month grace period after leaving school before they had to start the repayment of their loans
The agency further found that for some borrowers who had availed multiple loans, the lender processed payments in a way as to maximise late fees.
''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. ''Consumers should be able to rely on their servicer to process and credit payments correctly and to provide accurate and timely information.''
The bureau said, Wells Fargo did not reveal to borrowers how it divided single payments between their multiple loans, and failed to make borrowers aware that they could decide how payments were to be allocated, which led to the possibility of unnecessary late fees.