Sallie Mae Class Action Settlement Gets Final Approval

A federal court has granted final approval to a class action settlement between Sallie Mae Inc. and consumers who alleged that the company unlawfully tacked on a 25 percent collection fee to defaulted student loans.

According to an update from the Settlement Administrator’s website, Sallie Mae plans to adjust Class Members’ accounts by Feb. 22, 2014, and arrange for the distribution of settlement checks to qualifying Class Members by March 19, 2014.
This final approval will resolve a 2011 class action lawsuit (Bottoni v. Sallie Mae Inc.) claiming that the fees were illegal because they were imposed on defaulted student loans that were handed over to third-party collection agencies. Between 2006-2010, the class action lawsuit states that Sallie Mae assessed almost $117 million in alleged improper collection fees.

Sallie Mae denied the accusations but agreed to shave off $76 million in debt owed by over 40,000 California borrowers by issuing refunds of the consumers fees that were already paid. If you were assessed and/or paid this fee while living in California within the period from July 13, 2006 through May 31, 2013, you may be eligible to receive a refund.

It should be noted that persons shall be deemed to be “in California” if 1) they were assessed a Collection Cost Assessment during the Class Period while residing in California, or 2) they were a California resident at the end of any month during the Class Period in which any payment was applied to their Collection Cost Assessment.

Under the terms of the Sallie Mae class action settlement, the fees paid by these Class Members will be retroactively reduced to 8.75 percent at the time of charge-off, and will remain in effect for the life of the outstanding loan. For borrowers who have paid off their loans, Sallie Mae will refund the difference between the amount of collection costs paid beyond the 8.75 percent rate and the amount that it wrote off in principal, interest and other fees, excluding collection costs. If the amount of collection costs paid in excess of 8.75 percent is less than the amount Sallie Mae wrote off, the borrower will get a $40 refund.

You do not have to take any action if you wish to participate in the Salle Mae class action settlement and receive a refund; you will automatically receive the relief describe above.

More information on your rights in the Sallie Mae Collection Fee Class Action Settlement can be found at http://classaction.kccllc.net/CaseInfo.aspx?pas=SBI.

The case is Angelo Bottoni, et al. v. Sallie Mae Inc., et al., Case No. 3:10-cv-03602, in the U.S. District Court for the Northern District of California, San Francisco Division.

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