Feds fine Wells Fargo $3.6M for illegal student loan practices

Feds fine Wells Fargo $3.6M for illegal student loan practices
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A federal regulator is ordering Wells Fargo to pay a $3.6 million civil penalty for illegal student loan servicing practices that increased costs and unfairly penalized some borrowers.

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The Consumer Financial Protection Bureau (CFPB) said the national bank hit borrowers with illegal late fees and deprived others of critical information needed to effectively manage their student loan accounts. In addition to the fine, the company must also refund $410,000 to consumers.

The agency said Wells Fargo processed payments in a way that maximized fees, made misrepresentations on billing statements and charged illegal late fees.

The company also failed to update and correct inaccurate, negative information that was reported to credit-reporting companies about borrowers who made partial payments or overpayments.

The CFPB has ordered the company to improve its student loan servicing practices and billing disclosures and correct errors on credit reports.

The agency said student loans make up the nation’s second-largest consumer debt market, with 40 million federal and private student loan borrowers who collectively owe roughly $1.3 trillion.

Last year, the agency said it found more than 8 million borrowers were in default on more than $110 billion in student loans.