The “exorbitant” fees Wells Fargo charged students who opened credit cards and other accounts under lucrative marketing agreements with U.S. colleges show the embattled lender doesn’t belong on campuses, Sen. Elizabeth Warren says.
In a letter to CEO Tim Sloan, whom the Massachusetts Democrat and presidential candidate has frequently criticized, Warren asked when the San Francisco-based bank learned of the findings in a Consumer Financial Protection Bureau report that showed its college customers paid an average of $46.99 in fees a year, more than three times the average of other banks, and how it responded.
“Wells Fargo has a history of aggressively and sometimes illegally squeezing its customers to boost its profits, and this report illustrates that the bank is deploying similar tactics on America’s college campuses to target vulnerable students,” Warren wrote. “When granted the privilege of providing financial services to students through colleges, Wells Fargo used this access to charge struggling college students exorbitant fees.”
Even before the CFPB review, Wells Fargo had begun “customer-friendly actions that support students, such as sending automatic zero balance alerts, and waiving monthly service fees” on checking accounts held by 17- to 24-year-olds, a spokesman said Thursday. “We will continue to take additional steps to better serve our student customers and help them succeed financially.”
The bureau’s report, which examined the 12 months from July 1, 2016, to June 30, 2017, showed that students paid a collective $27.6 million in fees to lenders who had negotiated deals to market their products on college campuses. Wells Fargo’s charges “demonstrate conclusively” that it shouldn’t be in such locations, Warren said.
The senator’s letter is the latest in more than two years of challenges for Wells Fargo, which agreed in December to pay $575 million to resolve claims with prosecutors in all 50 states and Washington, D.C., related to millions of phony accounts as well as issues in its auto- and mortgage-lending businesses.
Along with the payments, the lender agreed to field teams to answer questions regarding the issues, which have all been investigated by federal regulators, and to offer a website for consumers that explains remediation efforts.
In early 2018, the Federal Reserve ordered the bank not to expand its total assets beyond the nearly $2 trillion held at the end of 2017 until it resolves the regulator’s oversight concerns. Since then, the bank has agreed to pay $1 billion in civil penalties to settle government claims it sold some auto borrowers insurance they didn’t need under the pretense they might not qualify for their loans otherwise and charged fees to mortgage customers that it was supposed to be absorbing.
Last August, Wells Fargo said it would pay $2.09 billion to settle Justice Department allegations that the bank packaged mortgages that were higher risk than they appeared into securities sold before the 2008 financial crisis. Bank officials were aware that the borrowers had misstated their incomes, the department said, which would impede their ability to repay the loans.
Amid the revelations, Warren urged the Fed not to lift its growth cap until the bank’s board replaces Sloan, whose 30 years at the lender include a number of leadership positions, but Chairman Jay Powell sidestepped the request.
Wells Fargo climbed 0.6 percent to $49.22 in New York trading on Friday, widening its gains this year to 6.8 percent.
[Opinion: The Elizabeth Warren-Mick Mulvaney blood feud continues]
