Wells Fargo on Monday agreed to pay a $4.1 million settlement on allegations that it charged illegal fees and misled student-loan borrowers.

The Consumer Financial Protection Bureau (CFPB), a federal agency created after the 2008 financial crisis, says that the Sioux Falls, SD-based national bank processed payments in a way that maximized fees for many consumers. It also misled borrowers about repayment options in a way that could have led to an increase in the cost of their loans. Additionally, Wells Fargo failed to update inaccurate information passed along to credit-report companies and charged illegal fees.

“Because of the breakdowns throughout Wells Fargo’s servicing process, thousands of student loan borrowers encountered problems with their loans or received misinformation about their payment options,” said CFPB in Monday’s announcement of the settlement.

According to the agency, the action comes because the bank violated a couple of laws. Wells Fargo ran afoul of the Dodd-Frank financial reform law, passed in the aftermath of the financial crisis, which prohibits unfair and deceptive practices in financial services. The other violation was under the Fair Credit Reporting Act, a decades-old measure that protects consumers from purposely inaccurate reporting to credit agencies. Such reporting could make it unfairly difficult and expensive for borrowers to take out loans for other big purchases, such as homes or cars.

“Today’s consent order with the CFPB resolves three areas of concern cited by the bureau related to legacy payment procedures that were retired or improved many years ago, and addresses the impact to a small number of customers. Wells Fargo is deeply committed to serving customers, investing in communities, and operating responsibly and ethically, and will continue to do so in a manner that is reflective of our vision and values,” said Jason Vasquez, a bank spokesperson, in the statement.

As part of the resolution, the CFPB has ordered Wells Fargo to improve its lending practices and to pay a combined $410,000 to affected borrowers, plus a $3.6 million civil penalty to the agency. The bank’s student loan arm, Education Financial Services, currently loans money for college to about 1.3 million people, according to the CFPB.

Wells Fargo is the second institution to be penalized by the agency since it found “widespread servicing failures” last year among federal and private lenders of college loans, said a spokesperson by email. Since its findings, the bureau has called for lending reforms and said it would start taking action against companies with illegal servicing practices.

It ordered Discover Bank and its affiliates to refund $16 million to consumers and to pay a $2.5 million penalty to the CFPB in 2015. In that case, the consumer agency found that the bank overstated the minimum amounts due on billing statements and denied consumers information they needed to obtain federal income tax benefits. It also used illegal debt collection tactics.

“Illegal servicing and debt collection practices add insult to injury for borrowers struggling to pay back their loans,” CFPB Director Richard Cordray said in a statement last year.

The actions come at a time when the number of struggling student loan borrowers is rising dramatically. In less than a decade, the number of federal student loan borrowers in the US has grown by nearly 45 percent, from 28 million to 41 million.

That influx of borrowers has more than doubled the amount of federal student debt (the majority of student loans are made by the federal government), the CFPB reported in its 2015 study. Today, as college costs are rising well above the rate of inflation, borrowers collectively owe $1.3 trillion, which makes college loans the biggest category of debt after mortgages.

“Unlike other types of consumer debt, which have realized reduced levels of delinquency and default compared to highs reached following the Great Recession, the student loan market continues to show signs of distress,” says the CFPB, which reports that a quarter of college loan borrowers are delinquent or in default.

Bad student loan servicing may be causing the problem, the CFPB said, according to Reuters.

Student debt drags down the rest of the economy, says the CFPB. It makes it hard for people to get credit for other big purchases, such as homes, reduces regular and retirement savings, and makes it unfeasible for people to work in sectors like healthcare and education, or to start their own businesses.