Free Answering Brief in Opposition - District Court of Delaware - Delaware

Case 1:04-cv-01551-JJF Document 379-19 Filed 10/05/2007 Page 1 of 4 I
O O
Exh1b1t 39

Case 1:04-cv-01551-JJF Document 379-19 Filed 10/05/2007 Page 2 of 4
' g Exam ,7**
_ 1, Ga ns, Roderick . E _0? Z-
:5 ·-•·· .
From: Lee, Darcy C. ` §
Sent: Friday, April 27,2001 12:55 PM xx // “ 06
To: Gagm, Roderick
; Subject: HE: SFC NY letter
RE:. SVB mf lotta:
Yes, this is the final dxaft he gave 1:0 me today. Will send today. Thamksi
I ll;-’H m=J72z=a i

Case 1 :04-cv-01551-JJ F Document 379-19 Filed 10/05/2007 Page 3 of 4
x
‘ Sent via Federal Express I
Apr}12'7, 2001 l
Mr. F1:a11lcMackin E
New York Department of Banking
2 Rector Street -
' New Yodc, NY 10006
SUBJECT`: Student Finance Co eration "SFC“ — Lender License A lication E
Dear Mr. IvIacl<;:i1z:`
Enclosed please End, per your request of ]f6I1“¤1B1’Y E9, 2001, e detailed loam history ledger
for a sample student loan made by SFC. The ledges shows all disbuxsemeuts made to the school
and payments made by the student borrows: throughout the life of the loan. Also enclosed is the l
corresponding loam agreomentfpromissery note containing the APR disclosure. ’
· During your phone conversation of Izmuary 29, 2001, with Darcy C. Lee, a legal assistant
at this firm, you expressed concern over the sescxve fund ammgement SFC has with its
. participating schools and how that mzangement affects the accuracy of the APR calculation made
by SPC. In response to that, please consider the following information. ‘
SFC’s promissory notes ami disclosures have lseeu reviewed by counsel for compliance _
with Regulation Z and have been verified as bei11g‘in compliance by the legal staff of the Federal ‘
j Reserve Board in Washington, D.C. which is the primary federal regulator that interprets
_ Regulation Z. SFC uses validated methodologies to compute the emma} percentage rate as
· specified by Regulation Z and the Tmth-in—Lending Act. SFC’s disclosures axe subject to review
by the Delaware State Banking Corx1m;issi0ner’s office which has examined them. SFC is also
` subject to the jurisdiction of {he Federal Trade Commission for violations of the 'I’1·uth~in·· `
Lending Act. Z
` Due to rising costs of education there is a gap between fnmcls available from federal, state
and local sid grant programs and the cost of tuition. To compensate for this gap between the cost `
· of education and the availability of aid, schools have been forced to increase the amommt of their .
own loans and grants. In many cases, schools have been forced to discount their revenue by .
· U lp;. cameo

Case 1:04-cv-01551-JJ F Docu ment 379-19 Filed 10/05/2007 Page 4 of 4
I? ` · osx F
I Mt. Frank Mackie
Page 2 _
April 27 , 2001
offering scholarships for some smclents and in other cases finance 1ong—tem1 receivables by 2
offering their own loans to students. Intemally administered loan programs subject the school to ?
‘ cash flow problems and economic risk. SFC’s program enables zi school to free up its cash flow
and reduce its risk: based on a system of discounts and reserves. The school signs a contract with
j SFC’e affiliate, Studenz Marketing Service, LLC, which markets SFC’s loans to schools. y
We enclose a copy of the school contract for your review. At the time of the ;
consummation of each loan, the school pays a discountlpxcgxam fee to SFC for implementation .
ofthe loan program at the school. We emphasize that the fee is payable by the school to SFC in _
consideration for the school receiving immediate funds alleviating the funding and cash flow ‘
issues to the school discussed above. The loan program/discount fee is not in anyway paid by or
dee from the student. Should the school fail to jpay the fee, the school is still obligated to provide E
education to the student. Moreover, the school’s failure to pay the discounvprogrem fee does not
enable SFC to enforce any right to the fcc against the student. SFC’s only recourse in the event -
the school failed topey the discountlpmgmm fee would be against the school.
The school also places some of tlie loan proceeds into a fund to ect as a reserve for
any loen defaults that may occur. The reserve funds belong to the school and if all loans are
repaid on e timely basis, the school will recover all of the funds in the reserve account. `The
reserve account was modeled after the forbearance account undez: Sallie Mads. guaranteed E
student loan program. The school substantially assumes the credit risk only during the early, E
most risky stages of the loan. Under the program, the reserve fend is used to pay for defaults that Z
may occur fIZO1Il early ncmpeyment or from students who do not complete their education. The -
amount of each loan. that is withheld and contributed to the reserve fund varies with the `
classification of each individual student. Students. ere classified based on S}?C‘s proprietary
_ credit scoring model. However, if the student makes the requisite payments on the loans the
‘ reserve is returned to the school.
We hope this letter has been responsive to your concerns, if so, please issue SFC’s Lender
` License as econ as possible. If you still have concerns about SFC’s.progi*aan and the accuracy of
r its disclosures, call me at (302) 777*6560 and I would be glad to speak with you about it.
` Sincerely,
mime P. eekmmi
”ol—;dlo~*e72e1