Sallie Mae Forfeits $97M
Sallie Mae, the largest servicer of federal and private students, was ordered to pay $96.6 million in restitution and penalties for violating the legal rights of U.S. service members, according to the Justice Department.
The payout settles claims Sallie Mae violated the Servicemembers Civil Relif Act by overcharging enlisted borrowers. Both DOJ and the FDIC reached settlements with Sallie Mae.
The violations were first revealed in a 2012 CFPB report that found service members were not provided clear and accurate information about their loan repayment options by student loan servicers.
Holly Petraeus, CFPB assistant director at the Office of Servicemember Affairs, lauded Attorney General Eric Holder and FDIC Chairman Martin Gruenberg for taking action.
“I have been concerned for some time about the way that military personnel are treated by their student loan servicers. The men and women serving this country should receive quality customer service and the legal protections afforded to them,” said Holly Petraeus, wife of General David Patraeus, former CIA Director.
“Instead, Sallie Mae gave service members the runaround and denied them the interest-rate reduction required by law. This behavior is unacceptable. And it's particularly troubling from a company that benefits so generously from federal contracts,” she added.
Patraeus also said the settlements should serve as warning to all institutions that provide or service loans to the military.
“Federal agencies will be vigilant about holding all financial institutions accountable for providing the protections that our service members have earned through their selfless service to our nation,” she said.
The CFPB partnered with DOJ to improve awareness of the rights and options available for service member student loan borrowers. The bureau began accepting student loan complaints in March 2012.