News

Illinois leads multi-state probe of student loan lender Sallie Mae

Illinois leads multi-state probe of student loan lender Sallie Mae

COLLEGE COSTS: Sallie Mae's lending practices are currently under investigation. Photo: Associated Press

By Joseph Ax

NEW YORK (Reuters) – SLM Corp, better known as Sallie Mae, faces a multistate probe led by Illinois into its student loan practices, a spokeswoman for Illinois Attorney General Lisa Madigan said on Thursday.

The investigation is part of an increasingly broad review of student lending by state and federal regulators.

In a filing with the U.S. Securities and Exchange Commission on Wednesday, Sallie Mae said it was facing “significant year-over-year increases” in the number of investigative demands and in the breadth of information being sought.

The rise in requests has been largely driven by state attorneys general and by the federal Consumer Financial Protection Bureau, the company said.

Madigan’s spokeswoman, Natalie Bauer, said Illinois and other states have opened an “active investigation” into Sallie Mae’s loan servicing and debt collection practices, among other issues. She would not identify the other states involved in the inquiry.

“Inquiries from state attorney generals have occurred regularly in the ordinary course of our business, for informational as well as regulatory purposes,” Patricia Christel a spokeswoman for the company said in an emailed statement.

“Since the passage of Dodd Frank, the frequency of these inquiries has increased significantly, and we are responsive to all requests, sharing how our customer service practices help customers succeed,” Christel added.

Congress created a consumer bureau in the 2010 Dodd-Frank law and called for an ombudsman who would watch over bank and other loans to students pursuing higher education.

Dodd-Frank encourages state attorneys general to take a more proactive interest in the companies that provide services to their residents and these are early conversations about Sallie Mae’s business, the company said.

Sallie Mae, the largest U.S. student loan provider, had set aside $70 million as of the end of 2013 to help resolve enforcement actions brought by the Department of Justice and the Federal Deposit Insurance Corp, according to regulatory filings.

The company is in the process of splitting into two companies, with one unit focused on student loans and the other handling its consumer banking business.

(This version of the story is filed to correct Sallie Mae spokeswoman’s name to Christel from Christe in paragraph 6)

(Reporting by Joseph Ax, additional reporting by Chris Peters; Editing by Mohammad Zargham and Supriya Kurane)

Recent Headlines

in Sports

This week’s top sports shots

little

A look at the biggest stories and best photography in sports this week.

in Sports

This weekend’s sports schedule

yankees

A complete look at this weekend's sports schedule.

in National

Making headlines this week

surf

A look at the week's biggest newsmakers and the stories you won't soon forget.

in National

WATCH: The history of Labor Day

21-overlay4

While you take your three day weekend, remember those who struggled to get Friday and Saturday off.

in Sports

Tony Stewart returns to NASCAR racing after fatal accident

Tony Stewart smiles as he speaks with his crew before the start of the rain delayed NASCAR Sprint Cup Series Daytona 500 race at the Daytona International Speedway in Daytona Beach, Florida, February 27, 2012.

Tony Stewart will return to racing this weekend at the Atlanta Motor Speedway for the first time since he struck and killed a young racer at a dirt track earlier this month.