Attorney General Cuomo Announces Agreement With Wells Fargo
NEW YORK, NY (May 29, 2007) – Attorney General Andrew M. Cuomo today announced an agreement regarding student loan practices with Wells Fargo, the nation’s fifth largest provider of student loans. In the latest development in Cuomo’s nationwide investigation, San Francisco-based Wells Fargo has agreed to abide by the Attorney General’s Code of Conduct for education loan practices.
Attorney General Cuomo said, “With this agreement, the five largest providers of student loans in the country have signed on to my office’s Code of Conduct. As our nationwide investigation continues, more lenders and schools are changing their practices. I applaud Wells Fargo for acting decisively to set an example that all lenders should follow. The message is clear – lenders large and small must adhere to best practices and help restore integrity to the student loan industry.”
To date, 24 schools have committed to Cuomo’s Code of Conduct, 9 of which have agreed to reimburse students over $3 million for the cost of revenue sharing agreements. Other than Wells Fargo, Cuomo’s investigation has resulted in agreements with the nation’s four largest student loan providers - Citibank, Sallie Mae, JP Morgan Chase, and Bank of America - as well as with Education Finance Partners (EFP) and CIT. Sallie Mae, Citibank, EFP, and CIT have also agreed to contribute $9.5 million to a national fund established by Cuomo that will educate high school students and their families about the financial aid process. On May 7, 2007, the New York State Legislature passed the Student Lending Accountability, Transparency, and Enforcement (SLATE) Act of 2007, which was sponsored at the request of Cuomo and is the first piece of legislation in the country aimed at ending the widespread conflicts of interest the student loan industry.
The Code of Conduct adopted by Wells Fargo includes the following provisions:
1. Ban on Financial Ties. Lenders are prohibited from giving anything of value to any college in exchange for any advantage sought by the lender. This severs any inappropriate financial arrangements between lenders and schools and specifically prohibits "revenue sharing" arrangements.
2. Ban on Payments for Preferred Lender Status. Lenders may not pay or give colleges any financial benefits whatsoever to get on a college’s preferred lender list.
3. Gift and Trip Prohibition. Lenders are prohibited from giving college employees anything of more than nominal value. This includes a prohibition on trips for financial aid officers and other college officials paid for by lenders.
4. Advisory Board Rules. Lenders are prohibited from paying college employees anything of value for serving on the advisory boards of the lenders.
5. Call-Center and Staffing Prohibition. Lenders must ensure that employees of lenders never identify themselves to students as employees of the colleges. No employee of a lender may ever work in or providing staffing assistance to a college financial aid office.
6. Disclosure of Range of Rates and Defaults. Lenders must disclose to any requesting school the range of rates they charge to students at the school, the number of borrowers at each rate at the school, and the lender’s historic default rate at the school. This will ensure that schools will have the information they need to select preferred lenders who are best for students and parents.
7. Loan Resale Disclosure. Lenders shall fully and prominently disclose to students and their parents any agreements they have to sell loans to any other lender.