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Wells Fargo to Pay $4 Million to Settle Student Debt Practices

The Consumer Financial Protection Bureau yesterday reached a $4 million settlement with Wells Fargo over allegations the bank charged illegal fees and failed to inform borrowers of their payment options, the National Law Journal reported. Wells Fargo will pay a civil penalty of $3.6 million to the consumer agency and provide $410,000 in relief to borrowers. The CFPB’s enforcement action marked the latest involving student loan practices that the agency has blamed for driving borrowers into default. “Wells Fargo hit borrowers with illegal fees and deprived others of critical information needed to effectively manage their student loan accounts,” said Richard Cordray, the CFPB’s director, in a prepared statement. “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.” According to a 34-page consent order, Wells Fargo maximized late fees by spreading payments across several loans in an account rather than portioning the funds to satisfy some of the amounts owed in a billing cycle. Also, the bank failed to inform borrowers with multiple loans that a partial payment could satisfy at least one account. Instead, Wells Fargo incorrectly advised borrowers that anything less than a full repayment in a billing cycle would not satisfy any debt obligation, according to the consent order.

Univision to Pay Gawker Founder Nick Denton Not to Compete

Gawker Media Group’s new owner, Univision Communications Inc., would pay Gawker’s founder $16,666 a month for the next two years in exchange for a promise not to work for the gossip site’s rivals, the Wall Street Journal reported today. Nick Denton would be paid about $400,000 by Univision, according to a noncompete pact filed with the U.S. Bankruptcy Court in New York. The Spanish-language broadcaster last week won a bankruptcy auction for Gawker with a $135 million bid, and then said that it was shutting down the site. The company insisted on the noncompete agreement with Denton, who earned $500,000 a year at Gawker, as a condition of the sale.

CFPB Flooded with Thousands of Comments Over Arbitration Rule

The Consumer Financial Protection Bureau’s (CFPB) moved to ban contract language prohibiting class action waivers proposal has generated thousands of comments, many from opponents who argue the ban would only benefit trial lawyers, the National Law Journal reported today. Insurance regulators have expressed their own concerns. Hundreds of law professors are backing the consumer agency’s proposed rule. U.S. lawmakers are divided. Broker-dealers have drawn distinction between investment contracts and consumer financial contracts — and they’re telling the CFPB to leave the regulation of their industry to the U.S. Securities and Exchange Commission. A trade group, the Securities Industry and Financial Markets Association, commented on July 1 that Congress did not intend in the Dodd-Frank reform law to give the CFPB and the SEC overlapping authority. On Aug. 11, a group of 19 state attorneys general — under the masthead of Massachusetts Attorney General Maura Healey — wrote that class action lawsuits complement their enforcement efforts.

Former Fannie Mae CEO Settles Crisis-Related Lawsuit with SEC

In one of the U.S. Securities and Exchange Commission's biggest cases tied to the 2008 financial crisis, former Fannie Mae Chief Executive Daniel Mudd has reached a settlement with regulators, Reuters reported yesterday. The deal with the SEC, detailed in papers filed in Manhattan federal court, resolves a 2011 lawsuit accusing Mudd of misleading investors about Fannie's exposure to risky mortgages before the crisis. Mudd had denied wrongdoing and he did not admit any in yesterday’s agreement. The deal concludes one of the SEC's few remaining cases tied to the housing downturn. Mudd was one of six executives at mortgage funding giants Fannie Mae and Freddie Mac sued by the SEC. The prosecutions were announced at a press conference in December 2011 but they ended in modest settlements over the following years.

Across the U.S., Workers at the Bottom of the Ladder Get Pay Raises

For Americans in the bottom quarter of the income scale, who were left behind for much of the expansion, pay is rising at the fastest rate since the recession, the Wall Street Journal reported today. The gains appear to be driven by more competition for workers, minimum-wage increases and initiatives by companies from McDonald’s Corp. to Nationwide Mutual Insurance Co. to JPMorgan Chase & Co., who have proudly declared that they would give their lowest-paid workers a boost. In the second quarter, weekly wages for full-time workers in the 25th percentile, those making about $13 an hour, were up 3.1 percent from a year earlier, according to Labor Department data. That’s the biggest increase since 2009 and exceeds the growth rate for median earners, or those making about $20 an hour for full-time work.

Settlement Fees Starting to Come in for Firms in 401(k) Fee Suits

Despite some major recoveries in class actions over excessive 401(k) fees, the group of lawyers litigating these cases remains small, as few are willing to put the whole firm at risk, reported today. Jerome Schlichter, a founding partner at 21-attorney Schlichter Bogard & Denton, who filed the first 401(k) lawsuits in 2006, said he knew from the start that these cases had the potential to put his firm out of business. When Schlichter took on his first 401(k) class action, about 10 years ago, he found that no other firm was filing similar actions for excessive plan fees. By the time he filed a complaint, he had already put nearly two years into researching industry practices, he said. At first it seemed the defendants, with their double-digit teams of lawyers, would succeed in killing the effort, he said. In Tussey v. ABB, for example, defense counsel for ABB and Fidelity received $42 million in fees, according to a court filing in that case. Instead of backing away, Schlichter Bogard took the necessary steps to fight back. And now, suits are on the rise and so are the settlement figures and attorney fee recoveries.