Sallie Mae and Navient to pay $97 million fine. Beginning in 2005 US military service members were overcharged for student loans or denied loans for which they qualified, 66,000 affected-NY Times

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5/13/14, "Sallie Mae to Pay Fine Over Loans to Troops," NY Times, Tara Siegel Bernard

"Sallie Mae, the giant student lender, and Navient, previously a loan servicing unit of Sallie Mae, have agreed to pay $97 million to settle allegations by federal regulators that military service members were charged excessive interest and fees on student loans.

The Justice Department said on Tuesday that beginning in 2005, the companies failed to cap interest on loans to military personnel at 6 percent — a ceiling they are entitled to as part of the Servicemembers Civil Relief Act. The department also asserted that the companies improperly obtained default judgments against service members.

In a related complaint, the Federal Deposit Insurance Corporation said that the companies improperly advised military members that they had to be deployed to receive benefits under the act, among other requirements that were misrepresented. The F.D.I.C. also said Sallie Mae and Navient applied payments in a way that maximized late fees and did not properly disclose on borrowers’ statements how the fees could be avoided.

The F.D.I.C. settlement requires the companies to pay $6.6 million in civil penalties, as well as $30 million in restitution to victims. The Justice Department settlement requires the companies to pay $60 million to about 60,000 service members who were affected, as well as a $55,000 civil penalty.

The settlement with the Justice Department also requires the companies to request that all three major credit bureaus erase any related black marks from the service members’ credit histories, and to improve the process in which military personnel notify Sallie Mae of their eligibility for the lower rates and benefits.

“Federal law protects our service members from having to repay loans under terms that are unaffordable or unfair,” Attorney General Eric H. Holder Jr. said in a statement, adding, “But as alleged, the student lender Sallie Mae sidestepped this requirement by charging excessive rates to borrowers who filed documents proving they were members of the U.S. military.”

Sallie Mae said in a statement that it was “confident that in settling these regulatory matters the bank is making the appropriate adjustments for our customers regarding past issues with disclosure of late fee assessments” and compliance with the Servicemembers Civil Relief Act.

Navient, which services and collects loans and is based in Newark, Del., was spun off from Sallie Mae’s parent company, the SLM Corporation, at the end of last month. John F. Remondi, the company’s chief executive, said in a statement that the company had “implemented changes in our procedures and training programs to prevent these mistakes from happening again.”

The regulators’ settlement is a result of a joint effort with the Education Department and the Consumer Financial Protection Bureau, which referred service members’ complaints to the Justice Department.

The Justice Department’s settlement and complaint have been filed in United States District Court in Delaware, and the settlement is pending court approval. The department said an independent administrator would be appointed to find victims and distribute payments."

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