Sallie Mae Agrees To Adopt Cuomo Code of Conduct

The nation's largest lender to college students, Sallie Mae, agreed yesterday to curb its marketing practices and pay a $2 million fine as a result of Attorney General Andrew Cuomo's widening inquiry into the $85 billion financial aid industry.

Citigroup accepted a similar settlement earlier this month, and Mr. Cuomo said he hopes to persuade smaller lenders to adopt his code of conduct.

"Sallie Mae accepts the code. Citibank, the second-largest lender, accepts the code. I think it's going to go a long way towards making it a reality," Mr. Cuomo said at a news conference. "It's also going to send a signal that these are the proper practices, and if Sallie Mae can do it and Citibank can do it, why can't the other lenders do it?"

A Sallie Mae spokeswoman, Martha Holler, said that unlike the Citigroup settlement, Mr. Cuomo didn't ask schools to return money to borrowers because the company doesn't have revenue-sharing agreements with colleges.

Sallie Mae does $23 billion in business with about 10 million borrowers at more than 5,000 schools, the company and Mr. Cuomo said.

While Mr. Cuomo conceded that Sallie Mae didn't engage in what he considers the industry's most egregious practices — such as so-called kickbacks and incentive programs — he said the company has agreed to stop identifying its call center personnel as school employees and to tighten incentives given to campus officials to serve on advisory boards.

The conduct code agreed to by Reston, Va.-based Sallie Mae includes bans on revenue-sharing agreements between colleges and lenders as well as gifts and junkets to campus officials.

The $2 million settlement will help fund the attorney general's effort to use mailings, a telephone hotline, and the Internet to teach high school students about loans to pay for college, Mr. Cuomo said.

Over the past month, Mr. Cuomo's investigation into the practices of student loan companies has led to the suspension of financial aid personnel at the federal Education Department as well as at Columbia University, the University of Texas, and the University of Southern California after disclosures that the officials had owned tens of thousands of dollars in stock in CIT Group's Student Loan XPress.

Mr. Cuomo yesterday said the investigation into CIT, a loan company, was continuing, but he declined to provide further details.