warrior1972
05-03-2007, 11:56 AM
Story Highlights• Committee asks FTC to investigate marketing by lenders
• $85 billion student loan industry focus of numerous investigations
• Sen. Dick Durbin says he's disappointed in response to his call for inquiry
• Sen. Edward Kennedy asks SEC to investigate various stock dealings
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WASHINGTON (Reuters) -- Opening a new line of inquiry into a scandal in the $85 billion student loan industry, the chairman of the House education committee asked the U.S. Federal Trade Commission Wednesday to investigate "unfair and deceptive" lender marketing practices.
With previous inquiries focused on conflicts of interest and stock dealings, California Democratic Rep. George Miller took aim at the besieged industry's promotional efforts.
"Every day, millions of students receive marketing letters from private lenders -- letters that are often intentionally designed to confuse or mislead students," he said.
"These tactics are nothing short of predatory lending. No company should be able to get away with using aggressive scare tactics to profit off students who are already taking on enormous amounts of college loan debt."
An FTC spokeswoman confirmed the commission received Miller's letter and would look into it.
Congress and state attorneys general are probing allegations of misconduct across the student loan industry, which plays a key role in financing U.S. higher education.
Investigators accuse some college financial aid officers of taking questionable payments and perks from lenders in exchange for placing the companies on "preferred lender" lists shown to students looking to borrow money.
On Tuesday, Illinois Democratic Sen. Dick Durbin said he was disappointed in the "half-hearted" response he got in October from the inspector general of the U.S. Education Department after Durbin called for a student loans inquiry.
In a letter to Education Secretary Margaret Spellings, Durbin asked whether the agency will investigate issues such as preferred lender lists.
Spellings, a former White House domestic policy adviser, launched a task force late last month to examine such matters.
New York Attorney General Andrew Cuomo has been at the forefront of the conflicts of interest probe. As his inquiry has progressed, lenders including Citigroup , Sallie Mae , JPMorgan Chase and Co. and Bank of America Corp. have agreed to a code of conduct recommended by Cuomo banning school-lender financial ties, "preferred lender" list payments and lender gifts to college employees.
Democratic Sen. Edward Kennedy, who chairs the Senate education committee, has asked the Securities and Exchange Commission to look into alleged 2001 stock dealings involving university financial aid officers, an Education Department official and an executive for lending group Student Loan Xpress, now owned by CIT Group Inc.
Congressional investigators are also looking at the sale of thousands of shares in student lending giant Sallie Mae by the company's chairman just days before its stock price fell in early February on a Bush administration budget proposal.
On marketing, Miller said committee investigators have found examples of unfair practices by lenders. He said some letters to students "use what appear to be official government logos and threatening language."
In a related development, Kennedy said in a statement he was pleased the Education Department has restored access to a national database on student borrowers that had been shut down after reports of abuses.
"I'm cautiously optimistic that the steps taken by the Department of Education will make the system more secure and prevent further instances of data mining," Kennedy said.
The Education Department in mid-April temporarily cut off access for lenders, loan holders, servicers and guaranty agencies to the National Student Loan Data System, which contains sensitive personal information on student borrowers.
The department said in a statement that access has been restored to 35 guaranty agencies, but not yet to other firms.
"The department continues to work to appropriately restore access to the NSLDS as quickly as possible," it said.
• $85 billion student loan industry focus of numerous investigations
• Sen. Dick Durbin says he's disappointed in response to his call for inquiry
• Sen. Edward Kennedy asks SEC to investigate various stock dealings
Adjust font size:
WASHINGTON (Reuters) -- Opening a new line of inquiry into a scandal in the $85 billion student loan industry, the chairman of the House education committee asked the U.S. Federal Trade Commission Wednesday to investigate "unfair and deceptive" lender marketing practices.
With previous inquiries focused on conflicts of interest and stock dealings, California Democratic Rep. George Miller took aim at the besieged industry's promotional efforts.
"Every day, millions of students receive marketing letters from private lenders -- letters that are often intentionally designed to confuse or mislead students," he said.
"These tactics are nothing short of predatory lending. No company should be able to get away with using aggressive scare tactics to profit off students who are already taking on enormous amounts of college loan debt."
An FTC spokeswoman confirmed the commission received Miller's letter and would look into it.
Congress and state attorneys general are probing allegations of misconduct across the student loan industry, which plays a key role in financing U.S. higher education.
Investigators accuse some college financial aid officers of taking questionable payments and perks from lenders in exchange for placing the companies on "preferred lender" lists shown to students looking to borrow money.
On Tuesday, Illinois Democratic Sen. Dick Durbin said he was disappointed in the "half-hearted" response he got in October from the inspector general of the U.S. Education Department after Durbin called for a student loans inquiry.
In a letter to Education Secretary Margaret Spellings, Durbin asked whether the agency will investigate issues such as preferred lender lists.
Spellings, a former White House domestic policy adviser, launched a task force late last month to examine such matters.
New York Attorney General Andrew Cuomo has been at the forefront of the conflicts of interest probe. As his inquiry has progressed, lenders including Citigroup , Sallie Mae , JPMorgan Chase and Co. and Bank of America Corp. have agreed to a code of conduct recommended by Cuomo banning school-lender financial ties, "preferred lender" list payments and lender gifts to college employees.
Democratic Sen. Edward Kennedy, who chairs the Senate education committee, has asked the Securities and Exchange Commission to look into alleged 2001 stock dealings involving university financial aid officers, an Education Department official and an executive for lending group Student Loan Xpress, now owned by CIT Group Inc.
Congressional investigators are also looking at the sale of thousands of shares in student lending giant Sallie Mae by the company's chairman just days before its stock price fell in early February on a Bush administration budget proposal.
On marketing, Miller said committee investigators have found examples of unfair practices by lenders. He said some letters to students "use what appear to be official government logos and threatening language."
In a related development, Kennedy said in a statement he was pleased the Education Department has restored access to a national database on student borrowers that had been shut down after reports of abuses.
"I'm cautiously optimistic that the steps taken by the Department of Education will make the system more secure and prevent further instances of data mining," Kennedy said.
The Education Department in mid-April temporarily cut off access for lenders, loan holders, servicers and guaranty agencies to the National Student Loan Data System, which contains sensitive personal information on student borrowers.
The department said in a statement that access has been restored to 35 guaranty agencies, but not yet to other firms.
"The department continues to work to appropriately restore access to the NSLDS as quickly as possible," it said.