Wells Fargo has agreed to pay more than $4 million in fines and rebates over allegations that it charged illegal fees to student-loan borrowers.
As part of a deal announced Monday, the San Francisco banking giant did not admit or deny wrongdoing but agreed to pay a $3.6-million penalty to the Consumer Financial Protection Bureau, plus $410,000 in refunds to borrowers who paid fees that the bureau said should never have been charged.
Wells Fargo spokesman Jason Vasquez said all of the CFPB’s allegations relate to practices that Wells Fargo changed several years ago and that affected only a small number of borrowers.
The CFPB said problems in the bank’s student loan servicing arm resulted in borrowers paying a few types of unnecessary fees from 2010 to 2013.
For instance, the bureau said that when borrowers who had more than one loan made a partial payment, the bank would apply part of that payment to each outstanding loan, even if the payment would have covered what was owed for one of the loans. The result is that borrowers might have paid late fees for all loans.
That’s reminiscent of a practice Wells Fargo and other banks, including JPMorgan Chase and Bank of America, have been sued over: maximizing the number of overdraft fees they charge by reordering transactions to pay the largest first, sometimes resulting in several overdraft fees for small transactions.
The Supreme Court in April upheld a lower court verdict ordering Wells Fargo to pay $203 million to customers who paid multiple overdraft fees because of that reordering.
The CFPB said Wells Fargo also improperly charged late fees to customers who paid on the last day of their payment grace period, discouraged borrowers from making partial payments and failed to update inaccurate payment information sent to credit bureaus, potentially harming borrowers’ credit scores.
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