SAN FRANCISCO (dpa-AFX) - The Consumer Financial Protection Bureau or CFPB said Monday that Wells Fargo & Co. (WFC) must pay a penalty of $3.6 million to the bureau for the bank's illegal private student loan servicing practices that increased costs and unfairly penalized certain student loan borrowers. The lender is also required to provide $410,000 in relief to the borrowers.
The CFPB said it identified breakdowns throughout Wells Fargo's servicing process, including the bank's failure to provide important payment information to consumers, charging consumers illegal fees, and failing to update inaccurate credit report information.
Because of the breakdowns throughout Wells Fargo's servicing process, thousands of student loan borrowers encountered problems with their loans or received misinformation about their payment options. In addition, Wells Fargo illegally charged certain consumers late fees even though the consumers had made timely payments.
Wells Fargo also failed to update and correct inaccurate, negative information reported to credit reporting companies about certain borrowers who made partial payments or overpayments.
The CFPB noted that Wells Fargo processed payments in a way that maximized fees for many consumers, while the bank's billing statements made misrepresentations to borrowers that could have led to an increase in the cost of the loan.
The CFPB found that the company violated the Dodd-Frank Wall Street Reform and Consumer Protection Act's prohibitions against unfair and deceptive acts and practices, as well as the Fair Credit Reporting Act.
CFPB Director Richard Cordray said, 'Wells Fargo hit borrowers with illegal fees and deprived others of critical information needed to effectively manage their student loan accounts.'
The CFPB's order requires Wells Fargo to improve its consumer billing and student loan payment processing practices.
Student loans make up the second largest consumer debt market in the U.S. Today there are more than 40 million federal and private student loan borrowers and collectively these consumers owe roughly $1.3 trillion, according to the CFPB.
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