Sallie Mae, the largest U.S. student loan provider, is facing a multistate probe into its student loan practices that's being led by the state of Illinois, a spokeswoman for Illinois Attorney General Lisa Madigan said Thursday.
Illinois and other states have opened an "active investigation" into Sallie Mae's loan servicing and debt collection practices, among other issues, according to Madigan's spokeswoman, Natalie Bauer. She would not identify the other states involved in the inquiry.
The investigation is part of an increasingly broad review of student lending by state and federal regulators. Sallie Mae said in a filing with the U.S. Securities and Exchange Commission, that it is facing "significant year-over-year increases" in the number of investigative demands and in the breadth of information sought. Sallie Mae had set aside $70 million as of the end of 2013 to help resolve enforcement actions brought by the Department of Justice and the Federal Deposit Insurance Corp, according to regulatory filings.
The rise in requests has been largely driven by state attorneys general and by the federal Consumer Financial Protection Bureau, the company said.
Congress created a consumer bureau in the 2010 Dodd-Frank law and called for an ombudsman who would watch over bank and other loans to students pursuing higher education. Dodd-Frank encourages state attorneys general to take a proactive interest in the companies that provide services to their residents and these are early conversations about Sallie Mae's business, the company said.
The company is in the process of splitting into two companies, with one unit focused on student loans and the other handling its consumer banking business.