Sallie Mae 2005 Annual Report Download - page 39

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Item 3. Legal Proceedings
The Company was named as a defendant in a putative class action lawsuit brought by three Wisconsin
residents on December 20, 2001 in the Superior Court for the District of Columbia. The lawsuit sought to
bring a nationwide class action on behalf of all borrowers who allegedly paid “undisclosed improper and
excessive” late fees over the past three years. The plaintiffs sought damages of one thousand five hundred
dollars per violation plus punitive damages and claimed that the class consisted of two million borrowers.
In addition, the plaintiffs alleged that the Company charged excessive interest by capitalizing interest
quarterly in violation of the promissory note. On February 27, 2003, the Superior Court granted the
Company’s motion to dismiss the complaint in its entirety. On March 4, 2004, the District of Columbia
Court of Appeals affirmed the Superior Court’s decision granting our motion to dismiss the complaint, but
granted plaintiffs leave to re-plead the first count, which alleged violations of the D.C. Consumer
Protection Procedures Act. On September 15, 2004, the plaintiffs filed an amended class action complaint.
On October 15, 2004, the Company filed a motion to dismiss the amended complaint with the Superior
Court for failure to state a claim and non-compliance with the Court of Appeals’ ruling. On December 27,
2004, the Superior Court granted our motion to dismiss the plaintiffs’ amended compliant. Plaintiffs again
appealed the Superior Court’s December 27, 2004 dismissal order to the Court of Appeals. The Court of
Appeals heard oral argument on January 11, 2006. Even if the Court of Appeals reverses the dismissal
order, we do not believe that it is reasonably likely that the Court would certify a nationwide class.
We are also subject to various claims, lawsuits and other actions that arise in the normal course of
business. Most of these matters are claims by borrowers disputing the manner in which their loans have
been processed or the accuracy of our reports to credit bureaus. In addition, the collections subsidiaries in
our debt management operation group are routinely named in individual plaintiff or class action lawsuits in
which the plaintiffs allege that we have violated a federal or state law in the process of collecting their
account. Management believes that these claims, lawsuits and other actions will not have a material
adverse effect on our business, financial condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
Nothing to report.