Competitor Sues Sallie Mae, Accusing the Student-Loan Giant of Monopolistic Tactics 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.
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