Michigan Attorney General Dana Nessel last Friday joined 30 other attorneys general in defending the states’ vital ability to enforce state and federal consumer protection laws against student loan servicers. In their brief filed in the United States Court of Appeals for the Third Circuit, the attorneys general argue that the case brought by the Commonwealth of Pennsylvania against student loan servicer Navient for exploiting student loan borrowers should be permitted to go forward in federal court.
In 2017, Navient — one of the nation’s largest student loan servicers — was sued by Pennsylvania for engaging in various unfair and deceptive business practices in servicing student loans. These practices included steering borrowers into forbearance rather than more favorable income-based repayment plans, misleading borrowers about when they needed to file annual certifications to remain enrolled in certain repayment plans, and consistently making payment processing errors that resulted in unnecessary fees and penalties. Pennsylvania’s complaint included claims under its unfair and deceptive business practices statute, as well as under the federal Consumer Financial Protection Act (CFPA).
After its 2017 motion to dismiss was denied, Navient appealed to the United States Court of Appeals for the Third Circuit.
“We all know that obtaining a college degree is not an easy feat and the cost of that degree can be overwhelming. To further burden those trying to improve their lives with deceptive or abusive business practices is unacceptable,” said Nessel. “Thousands of Michigan residents could be negatively affected by unscrupulous student loan servicers if we do not hold them accountable. I urge all Michiganders who have concerns surrounding treatment from Navient or any other loan servicer to please contact my Consumer Protection Division.”
Since 2014, the Michigan Attorney General’s Consumer Protection Division has received 57 complaints regarding Navient. The Consumer Financial Protection Bureau however, has received 1,628 student loan complaints and 330 student loan debt collection complaints from Michigan regarding Navient between 2011 and 2017.
In their brief, the attorneys general support Pennsylvania’s lawsuit, which seeks penalties, injunctive relief, disgorgement, and other relief by arguing that states have a substantial interest in protecting their residents from all unfair and deceptive business practices committed by businesses operating within their borders, including federal student loan servicers. Additionally, because consumer protection is and has always been an area of traditional state enforcement and the federal government has for decades welcomed the states’ unique expertise on this matter, Congress never intended to remove the states from their traditional role in protecting their residents from misconduct in the student loan industry.
While more than 92 percent of the $1.5 trillion in outstanding student loan debt is owned or guaranteed by the federal government, the day-to-day management of student loans is administered by a variety of private student loan servicing companies responsible for collecting payments, enrolling borrowers in specific repayment plans, facilitating the loan’s payoff, collecting on delinquent loans, and otherwise assisting borrowers as issues arise over the lifetime of a loan.
Congress intended that these loan servicers “act with honesty and integrity at all times to ensure that the financial aid programs – provided by the federal government – serve the best interests of students.” And state laws ensure that student loan servicers — like any other business – operate honestly in dealing with consumers.
Nessel joins the attorneys general of Alaska, California, Colorado, Connecticut, Delaware, Hawai‘i, Idaho, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, South Dakota, Tennessee, Vermont, Virginia, Washington, Wisconsin, and the District of Columbia in filing this brief.
A complaint can be filed with the Michigan Attorney General’s Consumer Protection Division by calling 877-765-8388 or via the online complaint form at https://secure.ag.state.mi.us/complaints/consumer.aspx.
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