Competitor Sues Sallie Mae Accusing the Student Loan Giant of by mustarhymes


									Competitor Sues Sallie Mae, Accusing the Student-Loan Giant of Monopolistic
Chronicle of Higher Education – September 17, 2002
Page 1 of 1

By RICHARD MORGAN                        with the Education Department,         service agency for the loan
                                         in 1997, that it no longer has a       company that was absorbed by
A competitor to Sallie Mae has           claim of holder to loans that have     Sallie Mae in a July 2000
filed an antitrust suit against the      been transferred to affiliates.        takeover, has meant that it has
student-loan giant in federal court                                             felt directly the consequences of
in Virginia, accusing Sallie Mae of      The complaint also alleges that        Sallie Mae's alleged tactics.
forcing students to use its loan         Sallie Mae has repeatedly set up
consolidation services.                  pacts with colleges offering illegal   A Sallie Mae spokeswoman,
                                         inducements in return for              Kathleen deLaski, said that Sallie
SLM Financial Corporation, better        exclusive access to students           Mae officials and lawyers had not
known as Sallie Mae, is a                needing loans, and that Sallie         yet seen the suit, but denied its
"reprehensible" monopolistic force       Mae attempted to coerce three          general accusations. Sallie Mae
in the student-loan industry,            national credit-reporting agencies     officials said that they felt the
according to College Loan                -- Equifax, Experian, and              company was singled out because
Corporation, which filed the             TransUnion -- into blocking            it is the largest corporation in the
lawsuit on Monday in federal             borrower-information requests          student-loan industry. "We're a
district court in Alexandria,            from College Loan Corporation.         little perplexed that CLC would
Virginia. The lawsuit alleges that       The lawsuit seeks a declaration        complain about our service
Sallie Mae's practices routinely         that Sallie Mae's practices violate    borrowers when we offer students
violate the federal Sherman              the Higher Education Act and           a better financial deal," Ms.
Antitrust Act, the Virginia              seeks at least $50-million as          deLaski said.
Antitrust Act, and the Higher            compensation to College Loan
Education Act.                           Corporation for bearing the            While she was unwilling to go
                                         effects of the alleged violations.     through a point-by-point
"Sallie Mae has violated the trust                                              refutation of the lawsuit, which
placed in them by thousands of           An outside lawyer for College          she had not seen, she conceded
students and their families," said       Loan Corporation, James K. Trefil,     that, on one point, there is "a
Mark Brenner, general counsel for        said in an interview Monday that       grain of truth" to the accusations.
College Loan Corporation. "It is         Sallie Mae has shown a                 Earlier this year, she said, Sallie
reprehensible that they are              "systematic and deliberate             Mae discovered that some of its
putting their pursuit of additional      pattern of conduct that has been       credit-reporting agencies were
profits ahead of the rights of           designed to hamper and stifle          selling the loan company's
young Americans."                        competition." As an example, he        customer-information list. In
                                         mentioned a calling center that        response, Sallie Mae ended
The crux of the case is an               Sallie Mae allegedly set up at a       relationships with two of its three
allegation that Sallie Mae is            college's financial-aid office;        agency partners, saying that it
operating under an interpretation        students calling the office, Mr.       would resume cooperation with
of the "single holder rule" that         Trefil said, were "funnelled" to       the agencies only if they stopped
runs counter to legal precedent.         Sallie Mae operatives. For legal       the practice of selling customer-
The single -holder rule requires         reasons, Mr. Trefil declined to        information lists.
borrowers to consolidate multiple        identify the institution. He also
student loans with their current         estimated that Sallie Mae's            Ms. deLaski called the credit-
holder, unless they have loans           alleged practices have meant that      agency partnership move a
with more than one holder. Sallie        College Loan Corporation has           "smart business decision, not
Mae claims that its affiliates -- the    been denied access to "upwards         coercion." She added that "an
number of which is unclear, but is       of 4,000" loan applications.           inexpensive source of marketing
perhaps, according to court                                                     has dried up" for the likes of
documents, in the dozens --              Mr. Trefil noted that College Loan     College Loan Corporation, and
constitute a massive single holder       Corporation's relationship with        they're understandably "sad"
-- despite its assertion in litigation   USA Group, a lender-information        about that.

To top