Regions reaches loan probe agreement

By SHERRI C. GOODMAN
News staff writer

Birmingham's Regions Financial Corp has reached an agreement with New York Attorney General Andrew Cuomo in his probe of the student loan industry, his office said Wednesday.

Regions, Alabama's largest bank, agreed to abide by Cuomo's seven-point code of conduct for education loan practices. Cleveland-based National City Bank and Charlotte-based Wachovia Education Finance Inc. also struck agreements.

Cuomo has subpoenaed as many as 20 banks as part of his investigation of banks paying kickbacks to colleges in return for their student-loan business. So far, 26 banks have agreed to the code of conduct and 10 banks agreed to reimburse students more than $3 million for the cost of revenue-sharing agreements.

Under the code of conduct, banks agree to ban financial ties between the lender and the college. The code also calls for a ban on payments from lenders to get on a college's preferred-lender list, gifts from banks to college employees and payment to college employees who serve on lenders' advisory boards.

Bank call center employees also cannot identify themselves as college employees or work in a college financial aid office.

Lenders also must disclose to any requesting school the range of rates they charge to students at the school, the number of borrowers at each rate, and the lender's historic default rate at the school. They also must disclose to students and their parents any agreements they have to sell loans to any other lender.

"We believe this code establishes a high standard for ethics in education lending, which ultimately works to the benefit of student borrowers," said Regions spokesman Rick Swagler. "We're committed to helping students and their families gain access to higher education and believe these principles can give them more confidence in the system."

Cuomo's office never indicated why it was looking at Regions, but the bank confirmed in April that it had received a subpoena.

Wednesday's agreement ends Regions' involvement in the probe, Swagler said.

Wachovia spokeswoman Carrie Ruddy said the bank believes it is important to "publicly endorse this set of principles to help promote industry-best practices."

Kristian Baird Adams, a spokeswoman for National City, said it already had lending principles in place.

"Did we technically sign the New York code? No, but we certainly support the spirit of it and the underlying principles," Adams told Bloomberg News.

E-mail: sgoodman@bahmnews.com
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