American Forces Press Service
WASHINGTON, May 14, 2014 – Justice Department officials announced an enforcement action yesterday against the nation’s largest servicer of federal and private student loans, which was found to be systematically violating the legal rights of U.S. service members.
Sallie Mae — also known as Sallie Mae Bank and Navient Solutions — is ordered to pay $96.6 million in restitution and penalties, officials said, adding that the Federal Deposit Insurance Corporation also reached a settlement with the companies that addresses allegations of student loan servicing misconduct.
“I commend Attorney General Eric Holder, FDIC Chairman Martin Gruenberg, and the staff at the Department of Justice and FDIC for taking action to protect student loan borrowers,” said Holly Petraeus, Consumer Financial Protection Bureau assistant director, who leads the CFPB’s Office of Servicemember Affairs.
“I have been concerned for some time about the way that military personnel are treated by their student loan servicers,” Petraeus said in a statement. “The men and women serving this country should receive quality customer service and the legal protections afforded to them. Instead, Sallie Mae gave service members the runaround and denied them the interest-rate reduction required by law. This behavior is unacceptable. And it’s particularly troubling from a company that benefits so generously from federal contracts.”
A 2012 CFPB report found that service members faced serious hurdles in accessing their student loan benefits, including the provisions of the Servicemembers Civil Relief Act that cap the interest rate on pre-existing student loans and other consumer credit products at 6 percent while the service member is on active duty, CFPB officials said. Servicers were not providing them with clear and accurate information about their loan repayment options.
Officials noted that the CFPB began accepting student loan complaints in March 2012, and added that service members who have an issue with their servicers should submit a complaint to the CFPB.
To submit a complaint, consumers can:
— Go online at http://www.consumerfinance.gov/complaint;
— Call the toll-free phone number at 1-855-411-CFPB (2372) or TTY/TDD phone number at1-855-729-CFPB (2372);
— Fax the CFPB at 1-855-237-2392; or
— Mail a letter to: Consumer Financial Protection Bureau, P.O. Box 4503, Iowa City, IA 52244
Additionally, through “Ask CFP,” or by calling 1-855-411-CFPB (2372), consumers can get answers to their questions, officials said.