On Monday, Wells Fargo reached an agreement to pay $4 million after federal consumer protection officials say the company charged unnecessary late fees. In addition, the company is required to refund $410,000 to all customers affected by the illegal charges between 2010 and 2013. Like many other institutions, Wells Fargo provides education loan options to students in need of higher education financing and is responsible for administering them or allocating responsibility to a qualified servicer.

Consumer Financial Protection Bureau (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. 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 bureau also found that Wells Fargo did not give borrowers an explanation regarding how it divided single payments within multiple loans. Moreover, Wells Fargo did not let customers know they could decide how the payments were set up–which, could have prevented the illegal late fees. In the billing statements, there were no clear instructions stating that partial payments could be made in order to decrease student debt.

Furthermore, when the company gave incorrect information to credit reporting agencies–it did not revise the data. Plus, the bank had set up the illegal late fees for some borrowers even when payments were made on time.

To illustrate, they charged late fees when customers paid on the last day of their grace period–which, was still within the scheduled time for payment. After leaving school, student loan borrowers are often given a six month grace period before starting a repayment plan.

When Wells Fargo’s customers did not meet the grace period requirements, the government found they were not accurately reported to credit bureaus. Investigators also noted that Wells Fargo had deliberately spread out payments, across multiple loans, in an effort to charge late fees. They told customers that paying less than the full amount due would not go towards load debt reduction. The truth is partial payments actually could count towards one loan in an account.

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After refunding the $410,000, Wells Fargo also has to pay a $3.6 million fine to the CFPB. Wells Fargo has to refund their affected customers within 90 days. Before that time, they also have to submit a plan to identify those customers. Currently, Wells Fargo has around 1.3 million student loan customers. In response, Wells Fargo said it has changed their methods of handling student loans, payments, and late fees. They claim they have addressed all concerns, and deny the charges.

Wells Fargo spokesman Jason Vasquez stated, “We did not agree with the CFPB’s assertions. We have voluntarily agreed to resolve the bureau’s concerns so that we can put the matter behind us.” According to the bank, the issues found their root in a system coding error that was noticed and corrected several years ago. The consent order also brought in loan payment procedures that were phased out or fixed five years ago.

Wells Fargo also issued this statement, “Today’s consent order with the CFPB resolves three areas of concern cited by the bureau related to legacy payment procedures that were retired or improved many years ago, and addresses the impact to a small number of customers.” In addition, the bank has to fix credit report errors and clearly explain how consumers can set up their payments.