[Code of Federal Regulations]

[Title 34, Volume 3]

[Revised as of July 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 34CFR682.212]



[Page 677-678]

 

                           TITLE 34--EDUCATION

 

 CHAPTER VI--OFFICE OF POSTSECONDARY EDUCATION, DEPARTMENT OF EDUCATION

 

PART 682_FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM--Table of Contents

 

                      Subpart B_General Provisions

 

Sec. 682.212  Prohibited transactions.



    (a) No points, premiums, payments, or additional interest of any 

kind may be paid or otherwise extended to any eligible lender or other 

party in order to--

    (1) Secure funds for making loans; or

    (2) Induce a lender to make loans to either the students or the 

parents of students of a particular school or particular category of 

students or their parents.

    (b) The following are examples of transactions that, if entered into 

for the purposes described in paragraph (a) of this section, are 

prohibited:

    (1) Cash payments by or on behalf of a school made to a lender or 

other party.

    (2) The maintaining of a compensating balance by or on behalf of a 

school with a lender.

    (3) Payments by or on behalf of a school to a lender of servicing 

costs on loans that the school does not own.

    (4) Payments by or on behalf of a school to a lender of unreasonably 

high servicing costs on loans that the school does own.

    (5) Purchase by or on behalf of a school of stock of the lender.

    (6) Payments ostensibly made for other purposes.

    (c) Except when purchased by the Student Loan Marketing Association, 

an agency of any State functioning as a secondary market or in any other 

circumstances approved by the Secretary, notes, or any interest in 

notes, may not be sold or otherwise transferred at discount if the 

underlying loans were made--

    (1) By a school; or

    (2) To students or parents of students attending a school by a 

lender having common ownership with that school.

    (d) Except to secure a loan from the Student Loan Marketing 

Association or an agency of a State functioning as a secondary market or 

in other circumstances approved by the Secretary, a school or lender 

(with respect to a loan made to a student, or a parent of a student, 

attending a school having common ownership with that lender), may not 

use a loan made under the FFEL programs as collateral for any loan 

bearing aggregate interest and other charges in excess of the sum of the 

interest rate applicable to the loan plus the rate of the most recently 

prescribed special allowance under Sec. 682.302.

    (e) The prohibitions described in paragraphs (a), (b), (c), and (d) 

of this section apply to any school, lender, or other party that would 

participate in a proscribed transaction.

    (f) This section does not preclude a buyer of loans made by a school 

from obtaining from the loan seller a warranty that--

    (1) Covers future reductions by the Secretary or a guaranty agency 

in computing the amount of loss payable on default claims filed on the 

loans, if the reductions are attributable to an



[[Page 678]]



act, or failure to act, on the part of the seller or previous holder; 

and

    (2) Does not cover matters for which a purchaser is charged with 

responsibility under this part, such as due diligence in collecting 

loans.

    (g) Section 490(c) of the Act provides that any person who knowingly 

and willfully makes an unlawful payment to an eligible lender as an 

inducement to make, or to acquire by assignment, a FFEL loan shall, upon 

conviction thereof, be fined not more than $10,000 or imprisoned not 

more than one year, or both.



(Authority: 20 U.S.C. 1077, 1078, 1078-1, 1078-2, 1078-3, 1082, 1097)