KENNEDY QUESTIONS STUDENT LOAN LENDER COLLECTION TACTICS

April 26, 2007

FOR IMMEDIATE RELEASE

WASHINGTON, D.C.—Today, Senator Edward M. Kennedy, Chairman of the United States Senate Health, Education, Labor and Pensions Committee, sent the following letters to Tim Fitzpatrick, CEO of SLM Corporation, and Michael S. Dunlap, Chairman and CEO of Nelnet, Inc.

Chairman Kennedy raises concerns about the collections process and the possible use of tactics that are prohibited by federal law and regulations.

The letters appear below.


April 26, 2007

Tim Fitzpatrick
Chief Executive Officer
SLM Corporation
12061 Bluemont Way
Reston, VA 20190

Dear Mr. Fitzpatrick:

I am writing about information that has come to my attention which raises concerns about private lenders’ treatment of borrowers in the Federal Family Education Loan Program. Specifically, I am concerned that several private lenders may be engaging in harsh and inappropriate tactics with regard to borrowers whose payments are overdue and or whose loans are in the collections process, tactics that are prohibited by federal law and regulations. My office has obtained information indicating that the company may have engaged in the following practices:

• Telling a borrower’s spouse that the borrower would go to jail if he didn’t pay – a blatantly false assertion;
• Putting a borrower into default who lost his home in a natural disaster, adding substantial default and collection fees to his loan balance, taking tax refunds, and garnishing his wages – all in violation of guidance from the Secretary of Education;
• Harassing a widower about illegitimate, forged loans under the name of his deceased spouse;
• Refusing to negotiate with borrowers about deferment;
• Regularly calling borrowers at their job after being instructed to stop;
• Harassing borrowers’ neighbors, family and co-workers;
• Using abusive and profane language to intimidate borrowers;
• Attempting to collect debts not owed;
• Attempting to collect from deceased borrowers’ families and relatives;
• Attempting to collect from elderly, disabled borrowers;
• Firing employees who attempt to help borrowers obtain correct information about their loan status;
• Instructing employees to give borrowers “the run around” rather than provide them with correct information on their loan status; and
• Intentionally sending loan payment notices to an incorrect address in order to force a borrower’s account into default.

In light of these events, I ask that you provide to my office information and documents concerning your company’s collections practices concerning federally-guaranteed student loans. Please see the attached Document Request for specifics. I ask that you coordinate the production of documents with Nicholas W. Bath, Counsel to the Committee, at (202) 224-6912.

Thank you for your consideration.

Sincerely,


Edward M. Kennedy
Chairman

For the complete letters please go to link at the top of the page