CIT Group Inc. said Monday that it placed three top executives at its Student Loan Xpress unit on leave just days after the companies were subpoenaed by New York state Attorney General Andrew Cuomo in his ongoing probe of the $85 billion student loan industry.
CIT Group Inc. said Monday that it placed three top executives at its Student Loan Xpress unit on leave just days after the companies were subpoenaed by New York state Attorney General Andrew Cuomo in his ongoing probe of the $85 billion student loan industry.
Student Loan Xpress Chief Executive Michael Shaut, president Fabrizio Balestri and vice chairman Robert deRose were placed on indefinite leave. The president of CIT Consumer Finance, Randall Chesler, will oversee Student Loan Xpress on an interim basis.
On Friday, Matteo Fontana, a top Department of Education official who oversaw the student loan industry was put on leave after it was reported that in 2003, he owned at least $100,000 worth of stock in Education Lending Group Inc., the former parent of Student Loan Xpress.
CIT Chairman Jeffrey Peek said in a statement that the company takes Mr. Cuomo's allegations very seriously and said the company plans to conduct an independent review of Student Loan Xpress' lending practices and procedures. CIT, which declined further comment, acquired Student Loan Xpress in 2005.
The AG's office said it was pleased with CIT's actions and that it believes the move "will continue to restore more integrity to the student loan industry."
In late 2006, former AG Eliot Spitzer began launched a probe into the student loan industry in late 2006., focusing on whether loan companies were paying "kickbacks" to colleges in exchange for becoming preferred lenders.
Mr. Cuomo intensified those efforts, and earlier this month he reached a $3.27 million settlement with six colleges, including New York, Fordham and St. John's universities. Citibank, one of the nation's biggest student lenders with $33.7 billion in loans, also agreed to pay $2 million into an education fund.
Earlier in the week, Columbia University put David Charlow, its executive director of financial aid, on leave after documents revealed that he sold more than $100,000 in Student Loan Xpress stock, while the lender was on Columbia’s preferred lender list. Mr. Cuomo’s office issued subpoena’s from Columbia to find out its relationships with lenders.
