Wells Fargo, Amazon Suddenly End Student Loan Partnership

Just six weeks after the announcement of the student-loan partnership program, Wells Fargo & Company (NYSE:WFC) and Amazon.com, Inc. (NASDAQ:AMZN) have reportedly terminated their agreement.

Without providing specific details, on Wednesday, a Wells Fargo spokesperson stated, “The promotion for Prime Student members has ended.” A spokesperson for the online retail giant, Amazon also confirmed the cancellation. The news was first reported by Bloomberg.

Announced on Jul 21, the partnership proposed to offer interest rate discount to Amazon Prime Student members applying for any private student loan products of Wells Fargo. Prime members would receive 0.50% discount on loans issued by Wells Fargo Education Financial Services, the bank’s student lending wing.

This unexpected termination of the partnership indeed comes as a surprise. The venture would have helped Amazon in making an entry in the growing student lending market. For Wells Fargo, the partnership would have boosted its market share in student lending business that have become highly competitive with players including fintech firms.

Currently, one of the largest originators of private student loans, Wells Fargo has been running its student lending operations since 1968 and serves over 1.05 million students, parent and family customers across 50 states. Other major lenders include Sallie Mae (NASDAQ:SLM) and Citizens Financial Group, Inc. (NYSE:CFG) .

Rapid growth in the U.S. student loans market has turned it into one of the biggest consumer debt markets of the nation, after mortgages. However, the student loan industry is currently under heightened regulatory scrutiny over alleged anti-consumer practices. Notably, earlier this month, Wells Fargo's was hit with a $3.6 million fine by the Consumer Financial Protection Bureau for unlawful private student loan servicing practices that resulted in increased costs and unfair penalties to certain student loan borrowers.

Wells Fargo currently has a Zacks Rank #4 (Sell) while Amazon carries a Zacks Rank #3 (Hold).

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>

WELLS FARGO-NEW (WFC): Free Stock Analysis Report

AMAZON.COM INC (AMZN): Free Stock Analysis Report

SLM CORP (SLM): Free Stock Analysis Report

CITIZENS FIN GP (CFG): Free Stock Analysis Report

Original post

Zacks Investment Research