I would like to take this opportunity to publicly offer my heartfelt congratulations to my good friend, Mark Powell, for his recent unconditional settlement of the abortive defamation suit filed against him. The dismissal of this suit stands as a landmark victory in our fight to achieve justice and serves as an example to everyone who has had the misfortune of doing business with Sallie Mae.
For those reading this who are unfamiliar with the events regarding the defamation suit, here's the full story:
Back about mid-February was when Sallie Mae first learned of the lawsuits being filed against it by AmeriTrain borrowers. Shortly thereafter, without warning or explanation, a large number of AmeriTrain loan accounts were transferred from SLM Financial, the subsidiary of Sallie Mae which originally serviced the AmeriTrain accounts, to Sallie Mae Servicing, another subsidiary normally responsible for handling federally guaranteed loans. In turn, Sallie Mae Servicing proceeded to demand immediate payment on the same loans for which SLM Financial had already granted 90-day deferments in January. Sallie Mae had once again demonstrated itself to be as duplicitous as it is greedy; while using one subsidiary to lie to the public, repeatedly assuring its borrowers that they had deferments and that their credit was in good standing, it was at the same time using another subsidiary to coerce payments with a renewed barrage of harassing phone calls, threatening dunning letters, and unwarranted black marks on credit.
The loan account shell game, which still continues even now, fooled nobody: Sallie Mae had broken its word, reneging on the deferments in retaliation for the lawsuits. Furthermore, it appeared that Sallie Mae was attempting to use the transfers to shield the privately originated AmeriTrain accounts under the umbrella of the Family Federal Education Loan Program, in effect changing the rules under which the loans had first been written. Indeed, on February 28 Sallie Mae Servicing notified me by E-mail that it was preparing to declare my loans in default and assign them to a guaruntee agency -- an unmistakable indication that this was precisely the bank's intent.
For those reading unfamiliar with how the federal student loan program works, guarantee agencies were set up as part of the program to ensure that students make timely payments on their loans. When a student goes into default, the bank assigns the loan to a guarantee agency. The agency then reimburses the bank for the amount of the loan in default and attempts to work with the student to collect payments. If the guarantee agency is unable to get the full amount owed by the student, then it, in turn, can obtain reimbursement directly from the federal government. Guarantee agencies have absolutely no authority or involvement whatsoever with private loans, such as those created for AmeriTrain. In theory, this system, which Congress designed, is meant to ensure that the banks and the students are all protected from financial hardship in the noble pursuit of education; hence, the "guaranteed" nature of the program. In actual practice however, the system has been grotesquely perverted into a massive racketeering operation victimizing literally tens of thousands of students every year. Exploiting the complex nature of the system, and an appalling lack of oversight, banks like Sallie Mae have for over a decade run roughshod over their borrowers, breaking just about every rule of ethics and every law you can name....and all because no one in the government ever does anything to stop them.
It was precisely this lack of oversight that Sallie Mae was attempting to exploit by transferring our loan accounts. Placing the accounts under the federal umbrella provided the bank with the option of obtaining immediate "reimbursement" from either a guarantee agency or the federal government, ensuring that Sallie Mae would suffer no financial loss for its violations of law, at the expense of American taxpayers.
Concurrent with the transfers, AmeriTrain borrowers received letters from Collen K. Hart, of SLM Financial, expressing "sincere regret" for their situation, and offering to process partial discharges of the loan balances. This surprise offer represented the most laughable policy reversal since Bill Clinton's presidency; for six months, SLM had given its borrowers a tough-luck attitude, consistently maintaining that there was "nothing they [SLM] could do", and continuing to insist on payments in full; but it was only *after* the lawsuits against SLM were filed that Ms. Hart and her colleagues had their miraculous epiphany, discovering that, in fact, there really was something they could do. Unfortunately SLM's newfound "sincerity" was anything but: the discharge forms enclosed with Ms. Hart's letter were loaded with outrageous terms, cloaked in legal language, that required the borrower to surrender any possible rights to legal action and leaving the final amount of the refund granted (if any) entirely at the bank's discretion. Like the loan transfers, the partial discharge offer was yet another carefully prepared trick designed to short circuit the lawsuits. Sallie Mae also came perilously close to using the discharge offer to talk the Virginia Department of Education into paying out from the Virginia tuition fund, an action which would have been disastrous, because, by law, disbursements from the fund go not directly to the student (the law thinks students aren't responsible enough to handle the money), but to...yes, you guessed it...Sallie Mae.
Seeing all this happening, Mark and I realized that something had to be done. Sallie Mae was again attempting to circumvent compliance with the laws it had broken with a series of calculated maneuvers designed to deceive the public and evade the lawsuits it was facing. In our view, every student who signed the partial discharge forms would be another victim of a successful scam; every transferred loan account represented potentially thousands of dollars in stolen taxpayer money. The moral obligation Mark and I were presented with was crystal clear; we had to take immediate action to alert the public to the fraud being perpetrated. To do any less would have been unconscionable. So we composed the "Translation of the Partial Discharge Form" (the full text of which is at this link: http://asfb.org/translation.php ) so that the public could read Sallie Mae's legal trickery in plain English. We researched the past history of Sallie Mae's abuse of the student loan system and posted our findings on ASFB. We contacted as many AmeriTrain borrowers as possible to explain to them why Sallie Mae had transferred their loan accounts without bothering to tell them ahead of time. We did what had to be done to prevent another crime from occurring, and we were successful.
No doubt frustrated that two students would dare interfere with his company's criminal designs, Robert S. Lavet, Senior Vice President of Sallie Mae, sent a March 18 cease-and-desist letter to Mark asserting the charges posted on ASFB to be "reckless and false" and "without factual basis" and threatening the defamation suit unless the allegations were immediately withdrawn (Mr. Lavet's letter is posted here: http://www.asfb.org/lavetdefacu.php ). The response letter Mark and I drafted and sent to Mr. Lavet (our response is here: http://asfb.org/dfmrspse.php ) clearly explained the factual basis for our allegations and offered Sallie Mae the opportunity to expeditiously resolve the matter simply by publicly affirming that it had no intention to seek reimbursement from the government for the loans in question and by honoring the deferments it had granted. We offered Sallie Mae the use of ASFB as a forum to respond to our allegations and to engage in a public dialogue with its borrowers to explain its actions. We gave Sallie Mae a perfectly fair chance to come forward and exonerate itself.
Mr. Lavet failed to respond to our letter. Instead, he chose to ignore our offer and pursue the defamation lawsuit against Mark -- a calculated, malicious suit which had but one sinister aim: to intimidate into silence a voice of truth exposing the tangled web of corruption spun by Sallie Mae.
Mark Powell and I were not intimidated.
Legal proceedings for the suit began in early April. Mark retained Dale Pittman to represent him, while counsel for the plaintiffs was John Fraser. The plaintiffs' lawsuit alleged that Mark "used the Internet to make and publish malicious, false, outrageous, and defamatory statements" and sought $100,000 in compensatory plus punitive damages. In response, Dale filed an immediate counter-suit on Mark's behalf which called for a discovery process with depositions of relevant witnesses, among them several key executives within Sallie Mae. In plain English, this means that Dale was going right to heart of the matter by getting at the fundamental issue to the entire case: the truth of the allegations Mark had published. Dale was asking for the court's permission to be allowed to see documentation within Sallie Mae and to question bank officials about such things as how they discussed compliance with the FTC Holder rule, the Truth-in-Lending Act, and other laws and policies.
Suddenly, the plaintiffs decided it wasn't such a good idea for this thing to be in a court of law anymore. In response to the counter-suit, Mr. Fraser immediately filed a motion to move the case to arbitration. Mind you, their original suit made absolutely no mention of arbitration whatsoever; it was just after Dale moved to start questioning people inside Sallie Mae that the plaintiffs decided the time was right to bug out of the courtroom. Unfortunately for them, Mr. Fraser's legal argument to move this case to arbitration stood on very shaky ground. Realizing that the its suit was not going to leave the courtroom (and not going anywhere else either), Sallie Mae decided it had better settle with Mark. The suit was dismissed without prejudice by mutual consent of both parties.
And therein, ladies and gentlemen, is the object lesson for all of us. The one place Sallie Mae most fears to be is a court of law; the bane of their existence is public scrutiny. Sallie Mae abuses the legal process to try to force people into going along with its scams. This company's executives view the law not as something to be respected, but as a tool in furtherance of their own self interest. They invoke the law when it is convenient to use as weapon to scare people into silence, such as their failed defamation suit, or as a shield to cover their crimes, such as their oft-cited arbitration clause. They ignore the law, such as the FTC Holder rule, the Truth-in-Lending Act, the Equal Credit Opportunity Act (I could go on ad infinitum), whenever it interferes with their company's schemes. Sallie Mae's entire modus operandi is the use of fear. They are a gang of bullies dressed in fancy suits. But, like any bully, they retreat when forcibly confronted.
And that is how you deal with them: do not compromise with them and do not let them intimidate you.
To anyone at Sallie Mae reading this: the charges against your company will not be withdrawn. The days of your intimidation of AmeriTrain borrowers are over.
Thanks again for reading folks
U.S.A. Click here to read other Rip Off Reports on SLM Financial "a Sallie Mae company" Click here to read other Rip Off Reports on SLM Financial - AmeriTrain