(Corrects Sallie Mae spokeswoman's name to Christel from
Christe in paragraph 6)
By Joseph Ax
NEW YORK Feb 20 SLM Corp, better known
as Sallie Mae, faces a multistate probe led by Illinois into its
student loan practices, a spokeswoman for Illinois Attorney
General Lisa Madigan said on Thursday.
The investigation is part of an increasingly broad review of
student lending by state and federal regulators.
In a filing with the U.S. Securities and Exchange Commission
on Wednesday, Sallie Mae said it was facing "significant
year-over-year increases" in the number of investigative demands
and in the breadth of information being sought.
The rise in requests has been largely driven by state
attorneys general and by the federal Consumer Financial
Protection Bureau, the company said.
Madigan's spokeswoman, Natalie Bauer, said Illinois and
other states have opened an "active investigation" into Sallie
Mae's loan servicing and debt collection practices, among other
issues. She would not identify the other states involved in the
"Inquiries from state attorney generals have occurred
regularly in the ordinary course of our business, for
informational as well as regulatory purposes," Patricia Christel
a spokeswoman for the company said in an emailed statement.
"Since the passage of Dodd Frank, the frequency of these
inquiries has increased significantly, and we are responsive to
all requests, sharing how our customer service practices help
customers succeed," Christel added.
Congress created a consumer bureau in the 2010 Dodd-Frank
law and called for an ombudsman who would watch over bank and
other loans to students pursuing higher education.
Dodd-Frank encourages state attorneys general to take a more
proactive interest in the companies that provide services to
their residents and these are early conversations about Sallie
Mae's business, the company said.
Sallie Mae, the largest U.S. student loan provider, had set
aside $70 million as of the end of 2013 to help resolve
enforcement actions brought by the Department of Justice and the
Federal Deposit Insurance Corp, according to regulatory filings.
The company is in the process of splitting into two
companies, with one unit focused on student loans and the other
handling its consumer banking business.
(Reporting by Joseph Ax, additional reporting by Chris Peters;
Editing by Mohammad Zargham and Supriya Kurane)