According to a new report, Wells Fargo is the latest big-name bank to be scrutinized as part of the Consumer Financial Protection Bureau’s ongoing investigation into student loan servicing practices.
The Wall Street Journal, citing people familiar with the matter, reports that the CFPB has been investigating the second largest private student-loan originator in the country since at least late last year.
While the sources didn’t specify what part of Wells Fargo’s servicing the Bureau is investigating, past probes have focused on payment processing and policies related to borrowers who have a difficult time making payments.
News of the Bureau’s investigation into the bank – which hasn’t serviced federal loans since 2011 – comes two months after Citigroup announced through a filing with the Securities and Exchange Commission that federal regulators had opened a probe into its student loan servicing practices.
According to Citi’s filing, the company is cooperating with the unnamed regulators, noting that similar serving practices have been the subject of an enforcement action against at least one other institution.
“In light of that action and the current regulatory focus on student loans, regulators may order that Citibank, N.A. remediate customers and/or impose penalties or other relief,” the filing states.
Before that, in July, the CFPB took its first student loan servicing action ever against Discover Bank.
According to the July enforcement action, Discover engaged in illegal student loan servicing and debt collection practices since at least 2010, when it acquired the more than 800,000 private student loans accounts from Citibank. Among other things, the bank was found to have overstated amounts due on student loans and failed to notify borrowers of their rights.
Just last week, the Bureau released the results of a public probe into potentially anti-consumer practices of the student loan servicing industry that received more than 30,000 consumer responses.
The report highlighted the key issues that concern many borrowers and included recommendations on how those problems can be handled such as creating industry-wide standards and providing clear and holding servicers accountable for their actions.
Wells Fargo Investigated by CFPB over Student Loan Servicing [The Wall Street Journal]
by Ashlee Kieler via Consumerist
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