CFPB Enters into Consent Order for Student Loan Servicing

August 22, 2016

On Monday, August 22, 2016, the CFPB entered into a consent order with Wells Fargo Bank for private student loan servicing practices which allegedly increased costs and penalized certain student loan borrowers.  The Bureau identified breakdowns throughout Wells Fargo’s servicing process including failing to provide important payment information to consumers, charging consumers unnecessary fees, and failing to update inaccurate credit report information. The order requires Wells Fargo to improve its consumer billing and student loan payment processing practices. The company must also provide $410,000 in relief to borrowers and pay a $3.6 million civil penalty to the CFPB.

“Wells Fargo hit borrowers with illegal fees and deprived others of critical information needed to effectively manage their student loan accounts,” said CFPB Director Richard Cordray.  “Consumers should be able to rely on their servicer to process and credit payments correctly and to provide accurate and timely information and we will continue our work to improve the student loan servicing market.”

The issues cited in the consent order dated back several years and were self-reported by Wells Fargo to the CFPB. According to the bank, a coding error – an issue corrected by Wells Fargo years ago – resulted in some consumers paying fees they did not owe.