- Created: Friday, 16 September 2016 13:37
By Gregory H. Lercher, Esq.
The Consumer Financial Protection Bureau (CFPB), an independent regulatory agency of the federal government, identified illegal practices and breakdowns throughout Wells Fargo’s student loan collection and servicing process. In summary, the CFPB found that Wells Fargo charged student borrowers illegal fees (such as charging on-time payers with late fees), failed to provide important payment information to consumers, and illegally failed to update and correct inaccurate credit report information it provided to credit reporting bureaus. These errors could damage a consumer’s ability to obtain new credit or apply for a job.
“Wells Fargo hit borrowers with illegal fees and deprived others of critical information needed to effectively manage their student loan accounts,” bureau 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.’’
Specifically, Wells Fargo illegally processed student loan payments in a way that made consumers pay unnecessary late fees. For example, student borrowers typically have their loans divided between multiple student loan accounts. If a borrower's payment was not enough to cover the total amount due for all loans in an account, Wells Fargo divided that payment among the loans in a way that maximized late fees rather than satisfying payments for some of the loans. Wells Fargo left borrowers in the dark about how it divided single payments between their multiple loans, did not make borrowers aware that they could decide how their payments would be applied across loans, and then hit consumers with unnecessary and avoidable late fees. Furthermore, Wells Fargo’s billing statements did not make it clear that partial payment could be counted toward paying down student debt.
Student Loan Lawsuit Settlement
The CFPB’s order requires Wells Fargo to improve its consumer billing and student loan payment processing practices. Wells Fargo must also provide $410,000 in relief to borrowers and pay a $3.6 million civil penalty to the CFPB. The CFPB’s order can be found at: Wells_Fargo_Bank_N.A._Consent_Order.pdf
The CFPB’s order comes as it takes steps to ensure that all student loan borrowers have access to adequate student loan servicing. Last year, the CFPB released a report outlining widespread servicing failures reported by both federal and private student loan borrowers and published a framework for student loan servicing reforms.
Students and their families can find help on how to tackle their student debt on the CFPB’s website. Student loans make up the second largest U.S. consumer debt market with roughly $1.3 trillion owed by borrowers who took out federal and private loans. Wells Fargo is the second-largest private student private student loan lender in the United States and services about 1.3 million consumers in the United States.
The consumer lawyers at LeavenLaw dedicate themselves to fighting for our client’s rights against banks, debt collectors, and the ‘Big Three” credit reporting agencies. LeavenLaw attorneys also zealously represent student loan borrowers and fight back against illegal practices like those described above. If you have been the victim of illegal student loan debt collection, or if you have errors on your credit report, please call us today at 1-855-LeavenLaw to schedule your free consultation. You can also access free copies of your credit report at www.annualcreditreport.com and then schedule a free credit report analysis with an experienced FCRA lawyer. For more information, please visit www.leavenlaw.com.