Sallie Mae, the largest servicer of federal and private student loans, was ordered to pay $96.6 million in restitution and penalties for violating the legal rights of U.S. service members, according to the Justice Department.
The payout announced May 13 settles claims that Sallie Mae violated the Servicemembers Civil Relief Act by overcharging enlisted borrowers. The DOJ and FDIC each reached settlements with Sallie Mae.
The violations were first revealed in a 2012 CFPB report that found service members were not provided clear and accurate information about their loan repayment options by student loan servicers.
Holly Petraeus, assistant director at the CFPB's Office of Servicemember Affairs, said, “The men and women serving this country should receive quality customer service and the legal protections afforded to them. Instead, Sallie Mae gave service members the runaround and denied them the interest-rate reduction required by law. This behavior is unacceptable. And it's particularly troubling from a company that benefits so generously from federal contracts.”
Petraeus also said the settlements should serve as warning to all institutions that provide or service loans to the military.
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