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FDIC to charge Sallie Mae with overcharging military personnel

  |   Aug. 10, 2013 at 10:29 AM
WASHINGTON, Aug. 10 (UPI) -- The former U.S. government-sponsored financial firm known as Sallie Mae said regulators would soon accuse the firm with overcharging for student loans.

Although what the actual charges might be was not revealed, the loans involved are specifically those that fall under the jurisdiction of the Servicemembers Civil Relief Act that puts a 6 percent cap on loans for members of the military, the firm said.

The law covers active service personnel and those who have loans before they are deemed on active duty.

When borrowers become active military personnel, they can request interest rates on student loans be capped, as the Servicemembers Civil Relief Act requires, The New York Times reported Saturday.

Sallie Mae, which was originally called the Student Loan Marketing Association and is now the SLM Corp., was a government-sponsored enterprise until the end of 2004, when it became independent.

Like its cousins, the Federal Home Loan Mortgage Corp., known as Freddie Mac, and the Federal National Mortgage Association, known as Fannie Mae, the firm's status as a government-sponsored enterprise meant that it included in its mission the goal of providing low-cost loans to make student loans available to as many people as possible.

Freddie Mac and Fannie Mae apply the same principles to home mortgages.

Sallie Mae is regulated by the Federal Deposit Insurance Corp., which is poised to accuse the firm of some violation of the Servicemembers Civil Relief Act, most likely the stipulation that it lower interest rates to 6 percent when a borrower becomes an active duty member of the military, the Times said.

"We've invested a lot in our compliance efforts, but we understand some concerns persist, and we realize that the bar is getting higher," said Martha Holler, a Sallie Mae spokeswoman.

Holler said Sallie Mae is "open to our regulator's recommendations for improvement."

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