Wells Fargo to Pay $4 Million to Settle Student-Loan Servicing Probe
August 22 2016 - 5:40PM
Dow Jones News
WASHINGTON—Wells Fargo Bank agreed to pay $4 million to resolve
allegations by the Consumer Financial Protection Bureau that it
used illegal payment-processing practices resulting in higher costs
for some borrowers.
The settlement includes a $410,000 refund to affected consumers
and a $3.6 million civil penalty to the CFPB, which has recently
stepped up its scrutiny of student-loan servicing companies.
The unit of Wells Fargo & Co. said it disagreed with the
CFPB's assertions. A bank spokesman noted that the watchdog
agency's allegations related to loan-payment procedures that were
retired or improved years ago and affected "a small number of
customers."
The CFPB said thousands of student-loan borrowers encountered
problems with their loans or received misinformation about their
payment options because of "breakdowns" in Wells Fargo's servicing
process.
Specifically, the agency pointed to a practice by the bank that
it said maximized late fees: If a customer paid less than the
amount due, the bank would divide the payment across multiple loans
in the account, rather than satisfying payments for some of the
loans. The bank also is accused of charging late fees to some
consumers who made payments on the last day of their grace periods
or paid their monthly amount through multiple partial payments
instead of one full payment.
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. In
a study released last 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.
The Wall Street Journal reported in October that the CFPB was
investigating Wells Fargo over its student-loan servicing
practices.
Write to Yuka Hayashi at yuka.hayashi@wsj.com
(END) Dow Jones Newswires
August 22, 2016 17:25 ET (21:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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