Governor Spitzer Signs Law To Address Conflicts Of Interest In Student Loan Industry
Albany, NY (May 30, 2007) - Governor Eliot Spitzer and Attorney General Andrew M. Cuomo today announced the signing of landmark legislation to protect students and their families from abuses and conflicts of interest in the student loan industry. Under this legislation, New York becomes the first state to offer a comprehensive solution to widespread abuse in the student loan industry, which has affected millions of working and middle class families nationwide.
The Student Lending Accountability, Transparency and Enforcement (SLATE) Act of 2007, was passed unanimously by the Legislature earlier this month at the request of Attorney General Cuomo. The new law addresses problems exposed as a result of his ongoing investigation into the widespread conflicts of interest throughout the $85 billion-per-year student loan industry.
The measure codifies Cuomo's College Loan Code of Conduct, which is the basis for settlements with the nation's top lenders and dozens of schools across the country. Congressional leaders have endorsed the SLATE Act as a national model. The United States House of Representatives recently passed similar national legislation by a nearly unanimous vote. The U.S. Senate is expected to take up the issue soon.
"This legislation provides important protections to New York students and their families, too many of whom have been taken advantage of and cheated while in pursuit of quality higher education," said Governor Spitzer. "I thank the Attorney General for his tireless investigation and for championing this important legislation."
"I applaud the Governor for signing into law much needed protections for New York's students and their parents grappling with how to pay for college. The passage of this first-of-its-kind legislation demonstrates New York's growing legacy as a national leader in creating effective, progressive, high impact laws that not only move the state, but the entire nation forward," said Cuomo. "The next step is for the U.S. Senate to take action, and move national legislation to the President's desk as soon as possible."
The Student Lending, Accountability, Transparency and Enforcement Act includes the following provisions:
- Prohibits lenders from making gifts - including the practice of revenue sharing - to colleges and universities or their employees in exchange for any advantage in loan activities;
- Bans colleges and universities from soliciting, accepting or receiving any gifts whatsoever - including those construed as part of a revenue sharing practice - from lenders in exchange for advantageous loan consideration;
- Bars college and university employees from receiving any advantage, reimbursement or benefit from serving as a member of a lender's advisory board;
- Prohibits lender employees and agents from posing as college or university employees, including staffing the school's financial aid offices with lender employees;
- Bans lenders and schools from agreeing to certain quid-pro-quo high-risk loans that prejudice other borrowers or potential borrowers; and
- Dictates strict criteria that schools must abide by if they continue to use "preferred lender" practices.
Prior to the creation of the SLATE Act, 24 schools independently committed to Attorney General Cuomo's "Code of Conduct," eight of which have agreed to reimburse students more than $3 million for the cost of revenue sharing agreements. The Attorney General's investigation, which first began in 2006 under then-Attorney General Eliot Spitzer, has also resulted in agreements with the nation's five largest student loan providers - Citibank, Sallie Mae, JP Morgan Chase, Wells Fargo and Bank of America - as well as Education Finance Partners (EFP) and CIT. Sallie Mae, Citibank, EFP, and CIT have also agreed to contribute a combined $9.5 million to a national fund for educating high school students and their families about the financial aid process.