Cuomo Expands College Loan Investigation:
NEW YORK, NY (August 1, 2007) - Opening a new chapter in his ongoing investigation into the student loan industry, New York State Attorney General Andrew M. Cuomo today served subpoenas and document requests on 40 universities seeking information on deals their athletic departments made with a student loan provider. Thirty eight of the universities subpoenaed are Division I schools. Student loan provider, Student Financial Services, Inc. (SFS), doing business under the name University Financial Services (UFS), was also subpoenaed. Cuomo is investigating whether athletic departments at these universities agreed to promote SFS loans to students in exchange for kickbacks.
"Students trust their University's athletic departments because so much of campus life at Division I schools centers around supporting the home team," said Cuomo. "To betray this trust by promoting loans in exchange for money is a serious issue, especially when Division I schools already generate tremendous revenue from their student athletes. Today's action is an important new step as we continue to examine the unethical conflicts that pervade the student loan industry."
The Attorney General's office is specifically investigating whether athletic departments evaluated UFS interest rates before recommending their federal loans, or if their endorsement of UFS was based purely on payments from the lender. Such an arrangement would constitute revenue sharing, which is a violation New York state consumer protection laws, as well as a violation of federal law.
A previous investigation by the Attorney General's office of Dowling College revealed that its athletic director had entered into a revenue sharing agreement with UFS on behalf of the college. Under the terms of this agreement:
- UFS agreed to pay Dowling College $75.00 for every loan application that was directed to them from the school's athletic department;
- The athletic department agreed to put links to UFS on their website and hand out UFS promotional materials in order to steer students towards UFS loans;
- The athletic department gave them permission to market their loans throughout campus, including book stores, student unions and other meeting places;
- The athletic department allowed UFS to utilize the department interns to assist with distributing promotional materials at events;
The Dowling agreement was the basis for continuing to investigate UFS's relationships with other athletic departments at universities across the nation. As part of its settlement with the Attorney General, Dowling agreed to terminate the Athletic Department's relationship with UFS.
Attorney General Cuomo is also investigating how athletic departments' are using school team names, mascots, colors and logos, to imply that UFS is the school's official lender.
The schools that received subpoenas and document requests include: Arkansas State University; Auburn University; Bowling Green State University; CAL State Sacramento; Central Michigan University; Colorado State University; East Carolina University; Florida Atlantic University; Georgetown University; Georgia Tech; Georgia State University; Howard University; Indiana State University; Marquette University; Ohio University; Oregon State University; Rutgers University; Southern Illinois University; Tennessee Tech; Texas Christian University; Tulane University; University of Alabama-Birmingham; UCLA; UNC Greensboro; University of Central Florida; University of Detroit Mercy; University of Houston; University of Kansas; University of Louisville; University of New Orleans; University of North Alabama; University of Oregon; University of Pittsburgh; University of South Florida; University of Texas at San Antonio; University of Texas El Paso; University of Texas Pan American; Wayne State University; Wright State University; Youngstown State University
The subpoenas and requests for information to the 39 schools specifically ask the Universities to provide:
- All documents relating to agreements made between athletic departments and UFS or other lenders;
- All documents showing payments made by UFS;
- All documents reflecting how and why UFS was chosen as the athletic department's recommended lender;
- All documents which show whether athletic departments compared other lenders rates to those of UFS;
- All documents related to the marketing of loans by athletic departments on behalf of UFS
- All benefits given by UFS to any employee of the college, including meals, trips and other perks;
- All documents reflecting communication between staff of the athletic associations and the related university or college, including emails;
Today's inquiry marks a new phase in Cuomo's nationwide investigation into the student loan industry. The investigation has already resulted in agreements with 12 student loan companies, including the eight largest lenders in America - Citibank, Sallie Mae, Nelnet, JP Morgan Chase, Bank of America, Wells Fargo, Wachovia, and College Loan Corporation - as well as Education Finance Partners (EFP), CIT, National City Bank, and Regions Financial Corporation. Citibank, Sallie Mae, Nelnet, CLC, EFP, CIT, Johns Hopkins University, Columbia University, Mercy College, and Career Education Corporation have all agreed to contribute a total of $13.7 million to the National Education Fund established by Attorney General Cuomo. This fund is dedicated to educating and assisting the country's high school students and their families about the financial aid process.
Cuomo's Code of Conduct has become New York State law as the Student Lending Accountability, Transparency, and Enforcement (SLATE) Act of 2007. Proposed federal legislation regarding the student loan industry also incorporates Cuomo's Code of Conduct: the Student Loan Sunshine Act has been passed by the U.S. House of Representatives and the U.S. Senate.
For Adobe PDF files you can download Adobe Reader from Adobe Systems.