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 Music

TOP 10: Count down the hottest songs this week


The top 10 songs from the Billboard Hot 100 chart for the week ending Oct. 3.

in Entertainment

REVIEW: Veteran cast can’t save ‘The Martian’


It has all the earmarks of a blockbuster, but still can't shake the feeling of missed opportunity.

in Entertainment

WHAT’S ON: New on Netflix, Amazon & Hulu in October


Get your remotes ready for a binge-worthy weekend of new movies and TV shows.

in Music

Rolling Stones get their own Cuervo bottle


The tequila maker is paying tribute to the rockers and their 1972 North American tour.

in Entertainment

‘The Walk’ puts audiences on edge


"The Walk," out in theaters on Friday, tells the story of the quirky Philippe Petit and a misty August morning in 1974 when he strung cables between the Twin Towers and walked across the gaping void.