Sallie Mae, the largest student loan lender in the country, announced yesterday that it will undergo deepened government probes into whether it violated consumer protection laws, reported The Huffington Post. The Consumer Finance Protection Bureau (CFPB), in conjunction with the Federal Deposit Insurance Corp. (FDIC) and the U.S. Department of Justice, is conducting the probe.
Last month, the Consumer Finance Protection Bureau (CFPB) began an investigation into Sallie Mae’s payment processing practices. Sen. Elizabeth Warren (D-Mass.) said that the federal government has been too easy on Sallie Mae in the past, despite repeating allegations of Sallie Mae “breaking the rules and ignoring its contractual obligations.”
A report released earlier this month by the CFPB revealed that Sallie Mae’s processing methods included penalizing borrowers for processing mistakes made by the company and misallocating the payments. This practice heightened late fees and dragged out payment periods for borrowers, according to the report.
However, shoddy payment practices are only a portion of what the government agencies are looking into in the investigation. Sallie Mae is alleged to have conducted discriminatory lending, violations of the Servicemembers Civil Relief Act (which relieves active-duty military of heavy financial pressure), and “unfair or deceptive” practices.
Sallie Mae has a past riddled with scandal and government probes. In 2007, before the conception of Dodd-Frank and the CFPB, the government launched a probe against Sallie Mae regarding the alleged use of “aggressive tactics” in its payment collection practices. The office of former chairman of the Senate education committee Sen. Edward Kennedy (D-Mass.) alleged that Sallie Mae “tried to collect debts . . . not owed, fired employees who attempted to help borrowers and intentionally sent payment notices to an incorrect address to force a borrower to default.”
The scandal surrounding Sallie Mae that year also surfaced kickbacks and conflicts of interest “among lenders, universities and government officials.”
In 2004, the office of the California attorney general launched a probe into Sallie Mae under allegations of consumer fraud. CNNMoney reported that the California attorney general’s office investigated into allegations that Sallie Mae misled students about the parameters of its private loans.
More recently, even government agencies have suffered criticism from certain politicians. These critical voices have indicted federal groups for being too lenient on Sallie Mae. Last month, Sen. Elizabeth Warren (D-Mass.) called the actions of the Department of Education and the Treasury into question, saying that those departments haven’t properly sanctioned the company.
Now, because the government agencies that were once in charge of investigating Sallie Mae failed to publicly and properly take action against the company, Warren’s CFPB has been increasing its involvement.
Josh is a writer and researcher with Ring of Fire. Follow him on Twitter @dnJdeli.
