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.”
The Justice Department's civil rights division has initiated
a number of enforcement actions in recent years to pursue those who don’t
fulfill their legal obligations under the Servicemembers Civil Relief Act,
Petraeus said. “I applaud their actions, which have put millions of dollars
back in the pockets of service members,” she added.
The enforcement action should serve as warning not only to
the student loan servicing industry, but also to all institutions that provide
or service loans to the military, Petraeus said. “Federal agencies will be
vigilant about holding all financial institutions accountable for providing the
protections that our service members have earned through their selfless service
to our nation,” she added.
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.
The CFPB heard from military borrowers, including those in
combat zones, who were denied interest-rate protections because they failed to
resubmit unnecessary paperwork. These kinds of obstacles prevent service
members from taking advantage of the full range of protections they have earned
through their service to this country, officials said.
The CFPB has partnered with the Defense Department to create
better awareness of the rights and options for service member student loan
borrowers. A CFPB guide for service members who have student loans contains
clear information on the various ways student loans can be repaid.
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 [Call:
1-855-411-CFPB] (2372) or TTY/TDD phone number at 1-855-729-CFPB [Call:
1-855-729-CFPB] (2372);
-- Fax the CFPB at 1-855-237-2392 [Call: 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 [Call: 1-855-411-CFPB] (2372), consumers can get clear, unbiased
answers to their questions, officials said.
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