May 14, 2014 10:06 AM EDT
Sallie Mae Settles for $97 Million in Federal Investigations From DOJ and FDIC
Sallie Mae has reached a settlement agreement with the U.S. Department of Justice and Federal Deposit Insurance Corp. (FDIC) to pay $97 million for its violations.
According to the Washington Post, the settlement is the result of federal probes into allegations the student loan lender cheated active duty servicemembers in the military. The FDIC also accused Sallie Mae of intentionally inducing late fees for its borrowers while processing monthly payments.
The Justice Department found Sallie Mae and its former subsidiary Navient Solutions responsible for violating the Servicemembers Civil Relief Act (SCRA) since 2005, the time when troops began entering Iraq and Afghanistan. Sallie Mae will pay $60 million to resolve the SCRA matter and $30 million to resolve the FDIC's case, plus a $6.6 million civil fine.
"We are sending a clear message to all lenders and servicers who would deprive our service members of the basic benefits and protections to which they are entitled: This type of conduct is more than just inappropriate, it is inexcusable. And it will not be tolerated," Attorney General Eric H. Holder Jr. said at a news conference.
The Huffington Post reported the total cost for Sallie Mae and Navient would be $139 million, since they were also forced to repay the borrowers who were wrongfully charged late fees. Those would then tack on an extra $42 million to the FDIC charge.
"We offer our sincere apologies to the servicemen and servicewomen who were affected by our processing errors and thus did not receive the full benefits they deserve," John Remondi, Navient chief executive, said in a statement not denying or admitting to any wrongdoing.
Said Sallie Mae, "We regret any inconvenience or hardship that our customers may have experienced."
With the settlements out of the way, the focus will no doubt turn to the U.S. Education Department's handling of Sallie Mae. A group of democratic senators, led by Elizabeth Warren (Mass.), has been outspokenly critical for the department's willingness to keep its contract with a lender that was accused of intentional violations against borrowers.
Now that Sallie Mae has all but admitted to the accusations against them, the Education Department will be under even more intense scrutiny.
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