Wells Fargo to pay $4 million for charging illegal student loan fees

Five pitfalls of student debt

Wells Fargo will pay $4 million after the government discovered it charged some of its student borrowers illegal late fees.

The bank agreed to pay a $3.6 million fine to the Consumer Financial Protection Agency, according to the settlement agreement.

He must also set aside $410,000 to reimburse customers who were hit by illegal charges, which occurred between 2010 and 2013.

Wells Fargo (WFC) is one of the largest private student lenders in the country and currently has approximately 1.3 million student loan customers.

Families usually turn to private lenders after a student runs out of federal government loans and still needs help paying the college bill. Federal loans generally carry lower interest rates than private loans, offer more consumer protections and are accessible to all students, regardless of their family’s financial situation.

Related: Don’t Be Fooled By Student Debt Relief Scams

The bank charged illegal late fees to some customers who made payments on the last day of their grace period, the CFPB said. Borrowers are usually given a six-month grace period after leaving school before they have to start repaying their loans.

The agency also found that for some borrowers with multiple loans, Wells Fargo processed payments to maximize late fees.

Fees charged illegally, according to the agency, were sometimes never refunded and incorrect information sent to credit reporting agencies was never updated.

Related: 4 Steps to Paying Off $100,000 in Student Debt

Wells Fargo said it has already stopped these practices. And some fees were charged due to a “system coding error” that was corrected, she told the agency.

“Today’s Consent Order with the CFPB addresses three areas of concern cited by the Board (CFPB) related to legacy payment procedures that were retired or enhanced many years ago, and addresses the impact on a small number of customers,” the company said.

Wells Fargo is not the first student lender to be sanctioned by the CFPB. One year ago, Discover had to pay a $2.5 million fine and reimbursing $16 million to customers for illegal student loan practices.

CNN Money (New York) First published August 22, 2016: 4:32 p.m. ET


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