Company failed to cap loan interest at 6 percent, distributed incorrect information.
Student lender Sallie Mae and Navient, a former unit and now-separate corporation, have agreed to pay $97 million in fines in order to settle allegations that they overcharged military members on student loans.
According to the New York Times:
The Justice Department said on Tuesday that beginning in 2005, the companies failed to cap interest on loans to military personnel at 6 percent — a ceiling they are entitled to as part of the Servicemembers Civil Relief Act. The department also asserted that the companies improperly obtained default judgments against service members.
In addition, the FDIC stated that the companies also incorrectly told military members that they had to have been deployed in order to receive the benefits, and maximized late fees without telling borrowers how to avoid said fees.
The Justice Department is requiring the companies to pay out $60 million to approximately 60,000 service members and $55,000 in civil penalties. In addition, the FDIC is requiring $30 in restitution and $6.6 million in civil penalties. In total, just over $97 million. The companies must also “request that all three major credit bureaus erase any related black marks from the service members’ credit histories.”
“We are sending a clear message to all lenders and servicers who would deprive our service members of the basic benefits and protections to which they are entitled: this type of conduct is more than just inappropriate; it is inexcusable, and it will not be tolerated,” Attorney General Eric Holder said at a press conference.