Update

CASE UPDATE: Attorney General Shapiro Announces Another Win in Lawsuit Against Nation’s Largest Student Loan Company

December 18, 2018 | Topic: Consumers

Court Denies Navient’s Motion to Dismiss in its Entirety, as All Nine Claims Proceed Towards Trial

HARRISBURG — Attorney General Josh Shapiro today announced another important victory in his lawsuit against the nation’s largest servicer of federal and private student loans, Navient Corporation, and its subsidiary Navient Solutions, LLC.

Yesterday, the United States District Court for the Middle District of Pennsylvania denied Navient’s Motion to Dismiss in its entirety. Navient had attempted to have eight of the Commonwealth’s nine claims dismissed. The lawsuit alleges widespread abuses in Navient’s student loan origination and servicing.

“Navient’s deceptive practices and predatory conduct harmed student borrowers and put their own profits ahead of the interests of millions of families across our country who are struggling to repay student loans,” Attorney General Shapiro said. “As I said before, I stand behind this lawsuit. We will work diligently to protect borrowers, and yesterday’s win will allow us to proceed towards trial. We still have important work to do in the case, but this brings us one step closer in our fight to provide justice to the students and families in Pennsylvania and across the country who have been harmed by Navient.”

A few of the key conclusions in the 70-page Order are:

  • The Court rejected Navient’s core argument, that the Federal Consumer Financial Protection Act (CFPA) prohibits states from bringing CFPA claims where there is already a pending lawsuit by the Consumer Financial Protection Bureau (CFPB) to address the same violative conduct. The Court wrote that CFPA’s “plain meaning” supports “the Commonwealth’s position that it can maintain its concurrent CFPA claims against Navient. To rule otherwise would require the Court to rewrite the CFPA” – a task “the Court cannot undertake.” (Opinion, Pages 29-30)
  • Navient tried to have the Attorney General’s claims tossed by arguing that the Federal Higher Education Act (HEA) shields Navient’s practices from scrutiny by Attorneys General under state laws that prohibit unfair and deceptive acts and practices. The Judge rejected Navient’s preemption argument, finding “that Navient’s suggested interpretation of [HEA] Section 1098g goes too far: the phrase ‘any disclosure requirements of any State law’ does not apply to the sort of claims alleged by the Commonwealth.” (35)
  • With respect to origination of subprime loans, the Attorney General’s Complaint “presents the types of unfair and unconscionable conduct in lending that has previously been found to state a colorable claim under” Commonwealth law. The Court summarized one of the Attorney General’s allegations as follows: “essentially, subprime borrowers served as pawns in Navient’s quest for profits.” (55-56)
  • With respect to the Attorney General’s claims that Navient steered borrowers into repayment options that were not in their best interests, “the Court agrees with the Commonwealth that Navient has both misconstrued the allegations in the Complaint and the relevant applicable law. Navient’s focus on purported compliance with federal disclosure requirements . . . misses the thrust of the Commonwealth’s claims.” (62)
  • With respect to the Attorney General’s claims that Navient led borrowers to miss deadlines to recertify income-driven repayment plans, the Court again rejected Navient’s arguments that compliance with HEA regulations was sufficient: “Only the Commonwealth’s allegations and not the actual disclosures are before the Court at this stage, and Navient again fails to convincingly explain how compliance with the [HEA] disclosure regulations would preclude liability.” (65)

As a result of today’s court order, the case will move forward. Recently, the Commonwealth requested that the judge issue an order requiring Navient to turn over borrower records not only for Pennsylvania but also for borrowers across the country.

Navient is facing similar lawsuits brought by the attorneys general of Illinois, Washington State, California, and Mississippi, and by the federal Consumer Financial Protection Bureau (CFPB). With yesterday’s ruling in the Pennsylvania case, Courts have now rejected four (CFPB, Washington, Illinois, and Pennsylvania) of Navient’s attempts to have cases thrown out. In the other two cases (California and Missisippi), the courts have not yet considered such motions.

Navient maintains a student loan servicing center in Wilkes-Barre with approximately 1,000 employees. Pennsylvanians collectively owe $64.5 billion in student loan debt, including at least $55 billion in Federal loans. The average debt for new graduates who graduate with student loan debt in Pennsylvania is nearly $37,000 – second highest in the country.

The Attorney General wishes to recognize the incredible efforts of the entire Office of Attorney General Bureau of Consumer Protection team in Pittsburgh. Student borrowers who believe they have been subject to these or other unfair or deceptive practices are encouraged to file a complaint with the Office of Attorney General at www.attorneygeneral.gov. They can also call 800-441-2555 or email scams@attorneygeneral.gov.

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