May 13, 2014

Petraeus welcomes DoJ action on Sallie Mae

May 14, 2014 – CFPB's Holly Petraeus commended action taken by the Justice Department and FDIC against Sallie Mae for student loan servicing misconduct and Servicemember Civil Relief Act violations.

Sallie Mae was ordered to pay $96.6 million in restitution and penalties. The actions taken against the loan servicer do not directly impact credit unions, however Petraeus noted in her comments Tuesday the increased scrutiny by the bureau of unfair or deceptive acts and practices and SCRA violations.

"The dedicated staff of the Department of Justice's Civil Rights Division has initiated a number of enforcement actions in recent years to pursue those who don't fulfill their legal obligations under the Servicemembers Civil Relief Act (SCRA)," said Petraeus, CFPB's assistant director of the office of servicemember affairs, in a statement.

"Today's action should serve as warning not just to the student loan servicing industry, but to all institutions that provide or service loans to the military," Petraeus said. "Federal agencies will be vigilant about holding all financial institutions accountable for providing the protections that our servicemembers have earned through their selfless service to our nation."

Under the SCRA, military servicemembers are eligible for a reduced interest rate of 6 percent on all student loans taken out prior to active-duty military service. This relief applies to both federal and private student loans. CFPB has partnered with the Department of Defense to create better awareness of the options available for servicemember student loan borrowers.