Sen. Elizabeth Warren (D-Mass.) requested on Thursday that Treasury Secretary Jacob Lew and Education Secretary Arne Duncan explain their relationship with Sallie Mae, which Warren said has continually broken the rules and ignored contractual obligations.
“While the government has been quite tolerant of Sallie Mae’s failings and helped Sallie Mae maintain its profitability, it is not nearly as generous when it comes to student borrowers,” Warren said. “For students who default on their federal loans, the accountability is relentless….Where is that kind of accountability for Sallie Mae?”
Sallie Mae has told investors that it expects enforcement action from FDIC over its alleged violation of laws that ban deceptive, unfair and abusive practices, and the FDIC will also publicly accuse the company of violating the Servicemembers Civil Relief Act designed to protect active-duty service members from financial pressures by lenders.
Warren requested in a letter to Lew and Duncan that they explain why their departments have not taken any actions against Sallie Mae.
“In 2008, the Treasury…reviewed 36 separate cases and found that Sallie Mae’s debt collection arm, Pioneer Credit Recovery, Inc., had violated its contractual obligations in each case…” Warren said in the letter. “And just a few months ago, the Department of Education’s Inspector General found that Sallie Mae had violated contractual terms by failing to report the verbal complaints it received from federal student loan borrowers. Despite Sallie Mae’s track record, your agencies appear to have given little more than a slap on the wrist…”
Warren said the government “has rewarded” Sallie Mae despite its alleged misconduct. Since 2009, the government has provided Sallie Mae with hundreds of millions of dollars in contracts.
Warren requested that the Department of Education provide insight into whether it would terminate its contracts with Sallie Mae if the lender is found to have violated federal law, measures taken in response to the IG’s report on the lender’s mishandling of consumer complaints and information on any and all penalties assessed on Sallie Mae in the past 10 years.
Additionally, Warren requested that the Treasury provide information on the response to the IG’s finding of failure to fulfill contractual obligations, as well as the agency’s view on Sallie Mae’s performance in determining the lender’s future contract extension eligibility.