Wells Fargo to pay $4.1 million to settle charges of illegal student loan practices
- Wall Street surges to new highs; transports set record
- lululemon athletica (LULU) Tops Q3 EPS by 4c; Adj.-Comps Outpaced Views
- Abbott (ABT) Files Complaint to Terminate Alere (ALR) Acquisition
- Costco Wholesale (COST) Tops Q1 EPS by 5c; Comps Up 1%, 2% Ex-Gas
- After-Hours Stock Movers 12/07: (VYGR) (LULU) (HRB( Higher; (OHRP) (VRNT) (CMTL) Lower (more...)
The sign outside the Wells Fargo & Co. bank in downtown Denver April 13, 2016. REUTERS/Rick Wilking
Get instant alerts when news breaks on your stocks. Claim your 2-week free trial to StreetInsider Premium here.
By Suzanne Barlyn
(Reuters) - A Wells Fargo & Co unit will pay $4.1 million to settle allegations that it engaged in illegal private student loan servicing practices that unfairly penalized certain borrowers, the Consumer Finance Protection Bureau (CFPB) said on Monday.
The bureau said it identified breakdowns throughout Wells Fargo's servicing process, including failing to provide important payment information to consumers, charging illegal fees and failing to update inaccurate credit report information.
Wells neither admitted nor denied the charges, the bureau said.
The settlement resolves three areas of concern related to "procedures that were retired or improved many years ago, and addresses the impact to a small number of customers," a Wells Fargo spokesman said. The procedures at issue were either retired or corrected between 2011 and 2013.
The $4.1 million sum includes a $3.6 million penalty to the bureau and a $410,000 fund for borrowers.
Last year, the CFPB found that more than 8 million U.S. borrowers are in default on more than $110 billion in student loans. Breakdowns in student loan servicing may be driving the problem, the bureau said.
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, the bureau said.
Loans from private lenders are a small fraction of that amount, totaling about $100 billion owed. But they are often used by borrowers with high debt levels who also have federal loans, the CFPB said.
The bureau said the bank processed payments in a way that made consumers pay more fees. If a borrower's payment was not enough to cover the total amount due for all loans in an account, the bank divided that payment among the loans in a way that maximized late fees rather than satisfying payments for some of the loans, the bureau said.
Wells Fargo's Sioux Falls, South Dakota-based education finance unit services about 1.3 million U.S. consumers, the CFPB said.
(Reporting by Suzanne Barlyn; Editing by Alan Crosby, Bernard Orr)
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- bluebird bio (BLUE) to Offer $200M of Common Stock
- China vows to punish local government officials for forging economic data
- Abe, Putin to improve Japan-Russia ties but breakthrough on islands unlikely
Create E-mail Alert Related CategoriesReuters
Related EntitiesWells Fargo
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!