Probe Launched on Sallie Mae Collection Tactics

Some pretty harsh allegations are being lobbed at Sallie Mae, the nation’s largest student loan company, including some potential FDCPA violations.

Senator Ted Kennedy’s office believes that Sallie Mae tried to collect debts that were not owed, fired employees who attempted to help borrowers and intentionally sent payment notices to an incorrect address to force a borrower into default, according to an article in today’s Washington Post.

Nelnet, a Nebraska student lender, was also included in the office’s tirade.

The student loan industry has been under extreme scrutiny in the wake of allegations of misappropriation of influence.  The alleged scandal includes things like kickbacks and conflicts of interest between lenders and universities.

Both Sallie Mae and Nelnet strenuously disagree with the Senator’s Office’s claims.  Both have also agreed to full participation in investigations.

Thanks, due in part, to one story coming out, the court of public opinion may find against the lenders regardless of whether any legal violations occurred:

Britt Napoli, a former special education teacher in California, lost his home in an earthquake in 1994.  Sallie Mae placed his student loan in default, claiming that Napoli did not respond to notices about overdue payments.  Napoli alleges that he never received any mail from Sallie Mae because he was living in a tent city without access to mail and surviving on help from the Red Cross.

Napoli claims that Sallie Mae refused to negotiate with him.  When the Washington Post asked Sallie Mae for a statement, Sallie Mae provided a letter from the Education Department's Office of Federal Student Aid, which indicated that the company had the right to put Napoli in default.