[Code of Federal Regulations] [Title 34, Volume 3] [Revised as of July 1, 2002] From the U.S. Government Printing Office via GPO Access [CITE: 34CFR682.212] [Page 690-691] TITLE 34--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. [[Page 691]] (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 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)