Navient, the loan-servicing company that was spun off from Sallie Mae — simply to sequester the troubled department from other operations — disclosed to investors that the company anticipates having to cough up yet another $103 million — on top of the $70 million this already set aside last year — to settle two federal investigations. The company has been investigated by the Federal Deposit Insurance plan Corporation and the Department of Justice, as well as other federal and state companies over how it managed plus processed payments made by student loan borrowers, including active-duty service members.
The spin-off of Sallie Mae’s loan-servicing business into its independent company, Navient, was officially completed at the end of April. According to Within Higher Ed, Navient now inherits all liability stemming from the government and state investigations of Sallie Mae’s loan-servicing business, the company said. The FDIC has cited Sallie Mae for unfair or deceitful acts involving the way it made disclosures to borrowers and assessed certain late fees.
Navient said Friday that, depending on its discussions with the FDIC, the company believes it will be required to refund $30 million worth of certain late fees to borrowers of Sallie Mae loans dating back to Nov 2005. In addition , in an effort to “treat many customers in a similar manner, ” Naveint said it also expected to “voluntarily” reimburse $42 million in late fees for borrowers whose loans were not owned by Sallie Mae but were maintained by them.
The Department of Justice has been probing whether Sallie Mae cheated active-duty servicemembers by not providing associated with the interest-rate discount to which these are entitled under federal law. To stay those allegations, Navient said this expected to pay out $60 million.
None of the settlements are finished, the company said. However , accounting standards generally require companies to disclose possible losses only when they are probable plus reasonably estimable.
As well as the Department of Justice and FDIC investigations, the Consumer Financial Protection Agency is also probing the companies. They are also dealing with investigations by a number of states, led by Illinois Attorney General Lisa Madigan.
Consumer promoters and a growing number of Senate Democrats have said they are concerned that this Education Department is too lax in its oversight of how Sallie Mae solutions loans on behalf of the government. Some possess called on the Education Department to assess penalties on Sallie Mae or to end its servicing agreement with the company.
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