Sallie Mae Loan Servicing Practices Probed by IllinoisAndrew Harris
Illinois Attorney General Lisa Madigan opened an investigation of loan servicing complaints against SLM Corp., the student lender known as Sallie Mae, amid growing scrutiny of education debt, her spokeswoman said.
Madigan, a Democrat, is leading a multistate probe, her spokeswoman, Natalie Bauer, said yesterday by phone while declining to identify the other states involved or say when the investigation began.
“We’re looking into the increasing reports of abusive servicing practices involving consumers who have taken on considerable student debt loads,” Bauer said separately by e-mail.
Sallie Mae is remaking its business after legislation passed in 2010 cut companies out of the market for government-guaranteed debt. The lender is splitting into two firms, separating its education-loan arm from its consumer-lending unit.
Sallie Mae, based in Newark, Delaware, is a maker and collector of educational finance loans extended to college and graduate school students and families with children in private schools, according to its website. It describes itself on the site as “the nation’s number one financial services company specializing in education.”
The lender was the subject of almost half the 3,800 complaints against student loan servicers lodged with the federal Consumer Financial Protection Bureau for the 12-month period starting October 2012, according to a report published by the bureau in October.
The most common complaints concern inaccurate payment processing and an inability to modify loans, according to the CFPB. The report also cited complaints lodged against the practices of American Education Services, Wells Fargo & Co., Discover Financial Services and JPMorgan Chase & Co.
Citing the scale of Sallie Mae’s business, the CFPB said in the report that “it is not surprising” the lender was the top target of complaints.
“In general, the distribution of complaints by company is generally consistent with our estimates of relative market shares,” the agency said.
Patricia Christel, a company spokeswoman, said in an e-mail that “inquiries from state attorney generals have occurred regularly in the ordinary course of our business, for informational as well as regulatory purposes.”
The frequency of those inquiries has increased significantly since the the Dodd-Frank financial reform legislation was signed into law in 2010, she said.
“We are responsive to all requests,” Christel said.
Madigan’s office has also investigated alleged abuses in the financing of home mortgages and for-profit college education.