NY adds 13 more lenders to student loan probe

By Joseph A. Giannone

NEW YORK (Reuters) - The office of New York Attorney General Andrew Cuomo expanded a sweeping investigation into the student loan industry with subpoenas and information requests to 13 more lenders, including some of the largest U.S. banks.

Cuomo's office and New York state's two top lawmakers also unveiled legislation to regulate student loan practices. The Student Lending, Accountability, Transparency and Enforcement Act, or SLATE, would require all New York colleges to adopt Cuomo's code of conduct for student loans or face fines.

With the new inquiries, sent on Friday, Cuomo's investigation has expanded to include the top 20 student lenders commanding more than 80 percent of the $85-billion-a-year U.S. student lending business.

The latest requests were sent to 10 of country's the largest banks: Bank of America; Citizens Financial Group, a unit of Royal Bank of Scotland; JPMorgan Chase; National City; PNC Financial Services Group; Regions Financial; SunTrust Banks; US Bancorp; Wachovia and Wells Fargo.

Cuomo's office also sent inquiries to three closely held student lenders: Access Group, College Loan Corp. and EdFinancial Services.

The subpoenas seek information about revenue-sharing programs as well as stock grants, gifts and trips bestowed by lenders on school officials to win more referrals.

REVOLVING DOOR?

The attorney general's office also said it wants to explore whether current or former employees of these lenders worked for the U.S. Department of Education in the past six years amid concern a revolving door at the department has led to lax oversight of student loan practices.

JPMorgan declined to comment. Wachovia said it has not engaged in revenue-sharing agreements. Although Cuomo's office has contact Wachovia in connection to a review of several school, it has not made a formal information request of the bank, said spokeswoman Kathleen Von Bergen.

William Eiler, a spokesman for National City, said his bank does not engage in the practices outlined by Cuomo.

Bank of America spokesman Joe Miller said the bank had seen reports saying that it had received a "request for information" from Cuomo's office, and the bank is in the process of receiving the request.

SunTrust spokesman Hugh Suhr did not know if the bank received an inquiry, but said the bank's internal rules prohibit inappropriate gift giving to win business. An internal review has not found any violations of that policy, he added.

Officials at the other lenders that received the latest inquiries could not immediately be reached for comment.

New York for the past six months has investigated financial arrangements between student lenders and about 100 colleges and universities. Cuomo said lenders have offered payments, shares and a variety of perks to schools and school officials to secure a place on preferred lender lists and win more business.

These and other arrangements were not disclosed to students, who may not get the best deal possible on their loans, Cuomo said.