SML Corp., better known as Sallie Mae, is targeted by federal agencies for possible violations of consumer protection laws, according to the company’s latest quarterly report.
Sallie Mae is the nation’s largest servicer of federally subsidized student loans and the largest provider of private student loans.
The company is telling investors that the Consumer Financial Protection Bureau last month launched an investigation into how the company processes borrowers’ payments on student loans.
The CFPB is not the only agency investigating Sallie Mae. The Federal Deposit Insurance Corp. (FDIC) and Department of Justice is looking at the company for alleged violations that include payment-processing issues, allegedly unfair or deceptive practices, and violations of the Servicemembers Civil Relief Act (SCRA), a federal law intended to ease financial burdens on active-duty members of the military.
Sallie Mae is regulated by the FDIC, which is poised to accuse the former government-sponsored firm of violating SCRA — likely the stipulation that it lower interest rates when a borrower becomes an active-duty member of the military. Sallie Mae became an independent entity in 2004.
“We are cooperating fully with the FDIC, DOJ and CFPB in response to their investigations and requests for information and are in active discussions with each with respect to any potential actions to be taken against us,” Sallie Mae stated in its quarterly filing Monday.
Sallie Mae could be required to “make further changes to the business practices and products of the Bank and our other affiliates to respond to regulatory concerns.”
Sallie Mae said it is could not estimate the financial penalties it could incur from regulatory actions.
Sallie Mae owns between 37 and 40 percent of the outstanding debt from the now-discontinued Federal Family Education Loan Program (FELP).