JPMorgan Chase & Co had brought the suit against Sallie Mae because it alleged that the latter had changed from a secondary market player to a primary player when it started to initiate loans in the late 1990s, which undermined the agreement the two companies had made, while eating into the business of the joint venture.
As a result of the agreement, Chase and Sallie Mae will extend their loan origination and servicing agreement through August, 2010 for schools that want to continue to use the Sallie Mae platform for Chase or Bank One loans (Bank One was acquired by Chase in 2004). In addition, Chase and Bank One will be required to sell new borrower loans to Sallie Mae if they are originated or serviced through Sallie Mae.
Meanwhile, the Bank One Education Finance sales force will now have the flexibility to market both Chase and Bank One-branded student loans using six of the US’ most popular origination/servicing platforms: ACS, AES, Ed Financial, Great Lakes, Nelnet and Sallie Mae, as well as other regional secondary market platforms.
This agreement allows us to provide even greater flexibility and choice to schools and their students by providing the products and services they find most desirable to finance higher education, said Scott Powell, chief executive of auto and student lending for Chase. This also gives us control over this very important business and creates a strong platform for growth.
