Sallie Mae 2014 Annual Report Download - page 31

Item 3. Legal Proceedings
We and our subsidiaries and affiliates are subject to various claims, lawsuits and other actions that arise in the normal
course of business. We believe that these claims, lawsuits and other actions will not, individually or in the aggregate, have a
material adverse effect on our business, financial condition or results of operations. In the ordinary course of business, it is
common for the Company, our subsidiaries and affiliates to receive information and document requests and investigative
demands from state attorneys general, legislative committees and administrative agencies. These requests may be for
informational or regulatory purposes and may relate to our business practices, the industries in which we operate, or other
companies with whom we conduct business. Our practice has been and continues to be to cooperate with these bodies and be
responsive to any such requests.
Pursuant to the terms of the Spin-Off and applicable law, Navient assumed responsibility for all liabilities (whether
accrued, contingent or otherwise and whether known or unknown) arising out of or resulting from the conduct of pre-Spin-Off
SLM and its subsidiaries’ businesses prior to the Spin-Off, other than certain specifically identified liabilities relating to the
conduct of our consumer banking business. Nonetheless, given the prior usage of the Sallie Mae and SLM names by entities
now owned by Navient, we and our subsidiaries may from time to time be improperly named as defendants in legal proceedings
where the allegations at issue are the legal responsibility of Navient. Most of these legal proceedings involve matters that arose
in the ordinary course of business of pre-Spin-Off SLM and we will not be providing information on these proceedings unless
there are material issues of fact or disagreement with Navient as to the bases of the proceedings or responsibility therefor that
we believe could have a material, adverse impact on our business, assets, financial condition, liquidity or outlook if not resolved
in our favor.
Regulatory Update
At the time of this filing, the Bank remains subject to the consent order (the “2014 FDIC Order”) relating to the
settlement of previously disclosed regulatory matters with the FDIC. Specifically, on May 13, 2014, the Bank reached
settlements with the FDIC and the Department of Justice (the “DOJ”) regarding disclosures and assessments of certain late fees,
as well as compliance with the SCRA. The DOJ Order was approved by the U.S. District Court for the District of Delaware on
September 29, 2014. Under the 2014 FDIC Order, the Bank agreed to pay $3.3 million in fines and oversee the refund of up to
$30 million in late fees assessed on loans owned or originated by the Bank since its inception in November 2005.
Under the terms of the Separation and Distribution Agreement, Navient is responsible for funding all liabilities under the
regulatory orders, other than fines directly levied against the Bank in connection with these matters. Under the DOJ Order,
Navient is solely responsible for reimbursing SCRA benefits and related compensation on behalf of both its subsidiary, Navient
Solutions, Inc., and the Bank.
As required by the 2014 FDIC Order and the DOJ Order, the Bank is implementing new SCRA policies, procedures and
training, has updated billing statement disclosures, and is taking additional steps to ensure its third-party service providers are
also fully compliant in these regards. The 2014 FDIC Order also requires the Bank to have its current compliance with
consumer protection regulations audited by independent qualified audit personnel. The Bank is focused on achieving timely
and comprehensive remediation of each item contained in the orders and on further enhancing its policies and practices to
promote responsible financial practices, customer experience and compliance.
In May 2014, the Bank received a Civil Investigative Demand from the CFPB in the Bank’s capacity as a former affiliate
of Navient as part of the CFPB’s separate investigation relating to fees and policies of pre-Spin-Off SLM during the period
prior to the Spin-Off of Navient. We are cooperating fully with the CFPB but are not in a position at this time to predict the
duration or outcome of the investigation. Given the timeframe covered by this demand, Navient would be responsible for all
costs, expenses, losses or remediation likely to arise from this investigation.
Item 4. Mine Safety Disclosures
N/A
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