NY Adds 13 More Lenders to Student Loan Probe
New York Attorney General Andrew Cuomo's office expanded a sweeping investigation into the student loan industry with subpoenas and information requests to 13 more lenders, including some of the largest U.S. banks.
Cuomo's office and New York state's two top lawmakers also unveiled legislation to regulate student loan practices. The Student Lending, Accountability, Transparency and Enforcement Act, or SLATE, would require all New York colleges to adopt Cuomo's code of conduct for student loans or face fines.
With the new inquiries, sent Friday, Cuomo's investigation has expanded to include the top 20 student lenders commanding more than 80% of the $85-billion-a-year U.S. student lending business.
The latest requests were sent to 10 of the country's largest banks: Bank of America; Citizens Financial Group, a unit of Royal Bank of Scotland; JPMorgan Chase; National City; PNCFinancial Services Group; Regions Financial; SunTrust Banks; US Bancorp; Wachovia and Wells Fargo. Cuomo's office also sent inquiries to three closely-held student lenders: Access Group, College Loan Corp. and EdFinancial Services.
The subpoenas seek information about revenue-sharing programs as well as stock grants, gifts and trips bestowed by lenders on school officials to win more referrals.
The attorney general's office also said it wants to explore whether current or former employees of these lenders worked for the U.S. Department of Education in the past six years amid concern a revolving door at the department has led to lax oversight of student loan practices.
JPMorgan declined to comment. Wachovia said it has not engaged in revenue-sharing agreements.
"The attorney general's office contacted Wachovia in connection with a review of certain schools but has not made any formal information request of Wachovia," said Wachovia spokeswoman Kathleen Von Bergen.
William Eiler, a spokesman for National City, said the Cleveland bank does not engage in the practices outlined by Cuomo. He declined to comment on whether the bank received an inquiry or subpoena from New York.
Officials at the other new targets could not immediately be reached for comment.
New York for the past six months has investigated financial arrangements between student lenders and about 100 colleges and universities. Cuomo said lenders have offered payments, shares and a variety of perks to schools and school officials to secure a place on preferred lender lists and win more business.
These and other arrangements were not disclosed to students, who may not get the best deal possible on their loans, Cuomo said.
Previously the state had probed the activities of Citigroup, SallieMae, CIT Group, NelNet, EFP, Educap and The College Board.
In the past two weeks, Cuomo reached settlements with Citi and Sallie Mae and announced a settlement on Monday with Education Finance Partners. The state has collected a total of $6.5 million in payments into a fund to educate students about financial aid.
The three lenders also promised to adopt a code of conduct drafted by Cuomo's office, halting deceptive and questionable practices such as gifts and fully funded trips for school officials, greater disclosure about "preferred lender" lists, loan resale disclosures and a ban on lenders staffing school-affiliated call centers.