Sallie Mae informed its shareholders this week that federal regulators were poised to penalize the company for violations of a federal law that offers special borrower benefits to members of the military.
According to Sallie Mae's second-quarter financial statement, the Federal Deposit Insurance Corporation notified the lender in July that it planned to take action against the company related to violations of the Servicemembers Civil Relief Act, among other laws. The law allows members of the armed services to receive an interest-rate reduction on loans taken out before active-duty service and offers them deferrals, principal reductions, and forgiveness, in some cases.
Sallie Mae said in the filing that it did not know what penalties the FDIC might impose.
In a written statement, a spokeswoman for the company said, "We've invested a lot in our compliance efforts, but we understand some concerns persist, and we realize that the bar is getting higher. We will do what it takes to get this right under the enhanced standards of the new environment."
Last October the Consumer Financial Protection Bureau released a report that said that loan servicers were making it difficult for members of the military to get access to benefits under the Civil Relief Act. The report, which was based on complaints filed with the consumer bureau, as well as input from town-hall meetings and forums, said that borrowers in the armed forces often received incomplete or inaccurate information from their loan servicers, and faced roadblocks when trying to obtain benefits.
On July 31 a Justice Department official told Congress that the agency was examining whether lenders were failing to lower interest rates on loans held by service members when they entered active duty.