Sallie Mae 2008 Annual Report Download - page 21
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On April 6, 2007, the Company was served with a putative class action suit by several borrowers in
U.S. District Court for the Central District of California (Anne Chae et al. v. SLM Corporation et al.) Plaintiffs
challenge under California common and statutory law the Company’s FFELP billing practices as they relate to
the use of the simple daily interest method for calculating interest, the charging of late fees while charging
simple daily interest, and setting the first payment date at 60 days after loan disbursement for consolidation
and PLUS loans thereby alleging that the Company effectively capitalizes interest. The plaintiffs seek
unspecified actual and punitive damages, restitution, disgorgement of late fees, pre-judgment and post-
judgment interest, attorneys’ fees, costs, and equitable and injunctive relief. On June 16, 2008, the Court
granted summary judgment to the Company on all counts on the basis of federal preemption. The decision
was appealed to the Ninth Circuit Court of Appeals. The appeal is pending.
The Office of the Inspector General (“OIG”) of ED has been conducting an audit of the Company’s
billing practices for special allowance payments under what is known as the “9.5 percent floor calculation”
since September 2007. The audit covers the period from 2003 through 2006 and is focused on the Company’s
Nellie Mae subsidiaries. While the audit is not yet complete and there has been no definitive determination by
the OIG auditors, initial indications are that the OIG disagrees with the Company’s billing practices on an
immaterial portion of the Company’s bills. We continue to believe that our practices are consistent with
longstanding ED guidance and all applicable rules and regulations. A final audit report has not been filed.
Once a final report is filed, it will be presented to the Secretary of ED for consideration. The OIG has audited
other industry participants on this issue and in certain cases the Secretary of ED has disagreed with the OIG’s
recommendation.
The Company continues to respond to numerous requests from state attorneys general and other
government agencies regarding marketing and debt collection practices.
Item 4. Submission of Matters to a Vote of Security Holders
Nothing to report.
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