Squelched report shows Wells Fargo charged high account fees to students
For months, the Trump administration hid a report showing that banks charged high fees to college students who opened accounts and held debit cards — and that Wells Fargo charged more on average than any other financial institution.
The report, which was done by the Consumer Financial Protection Bureau, was only released publicly only last week after consumer advocacy groups submitted freedom of information requests for the document. A copy was sent from the agency to the Department of Education in February.
Seth Frotman, the former student loan ombudsman at the Consumer Financial Protection Bureau, had accused agency heads of burying the report when he quit in protest earlier this year.
“When new evidence came to light showing the nation’s largest banks were ripping off students on campuses across the country by saddling them with legally dubious account fees, bureau leadership suppressed the publication of a report prepared by bureau staff,” Frotman wrote in his resignation letter.
The report reviewed accounts at nearly 600 colleges that had partnered with banks for student promotions. Some banks paid colleges based on the number of students who opened accounts, the report said. Though most most students who signed up for these accounts did so without accruing fees, certain banks “pose a risk to student consumers,” according to the report.
Financial institutions that did not pay colleges for promotion charged $11.93 in account fees on average over a 12-month period. But students paid an average of $36.52 in fees to banks that paid colleges for their sponsorship. Students who had accounts with Wells Fargo paid the most — an average of almost $47.
Wells Fargo spokesman Jim Seitz said that average costs vary by school. He added that some students may have more fee-eligible banking needs, like sending wires or purchasing more checks.
There is no indication in the Consumer Financial Protection Bureau report that Wells Fargo disproportionately serviced more students with such needs. The average is based on 30 colleges that had partnerships with Wells Fargo and reported the required data.
Wells Fargo waives monthly service fees on primary checking accounts for those between the ages of 17 and 24, Seitz added.
The Consumer Financial Protection Bureau declined to comment.
A spokeswoman for the Department of Education said in a statement that the agency’s report “is broader than the scope of the department’s oversight of schools’ compliance with cash management regulations, and any suggestion that the department is not ensuring that schools adhere to cash management regulations is false.”
Democrats, who take control of the House next month, could start an investigation. At the time Frotman resigned, Virginia Democratic Rep. Bobby Scott, a senior member of the House Education Committee, said his allegation that the bureau was hiding the report was “disturbing” and “warrants immediate investigation.”
Frotman’s new nonprofit Student Borrower Protection Center criticized the Consumer Financial Protection Bureau Tuesday for failing to produce an annual report on student loan borrower complaints this year. But the agency keeps a public database of complaints filed, which Frotman used to create his own analysis.
“Documenting abuses and listening to consumers should be a job for the federal government, yet even as Washington turns a blind eye and a deaf ear, leaders in states across the country are paying attention,” he said.
The Senate last week confirmed a new head for the agency, Kathy Kraninger, after it was led for about a year by former South Carolina Republican Rep. Mick Mulvaney, who is also head of the Office of Management and Budget.
Kraninger, who previously worked under Mulvaney at OMB, has drawn criticism from consumer advocates, who argue that she doesn’t have relevant experience.
“No wonder Mulvaney’s CFPB tried to make sure it would never see the light of day. The actions by these banks and CFPB officials that sought to cover it up must be investigated by Congress,” said Karl Frisch, executive director of Allied Progress, a consumer watchdog group.