FOR IMMEDIATE RELEASE:
August 30, 2019
Contact: Matt Baca (505) 270-7148
Albuquerque, NM—Attorney General Hector Balderas today joined a bipartisan coalition
of 32 attorneys general from around the country in defending the states’ vital ability to
enforce state and federal consumer protection laws against student loan servicers. In an
amicus 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 the federal courts.
“New Mexican students and families who seek an education and opportunities to
prosper should not be victimized by those who prey on them for taking out student
loans,” said Attorney General Balderas. “I will continue to fight to protect our students so
that they can build brighter futures for our communities.”
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 that are
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 serve the best interests of students.”
And state laws ensure that student loan servicers — like any other business – operate
honestly in dealing with consumers.
However, in 2017, Navient — one of the nation’s largest student loan servicers — was
sued by Pennsylvania, in the United States District Court for the Middle District of
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 state unfair and
deceptive business practices statute, as well as under the federal Consumer Financial
Protection Act (CFPA).
Later that year, in December 2017, Navient moved to dismiss Pennsylvania’s lawsuit
by, among other things, arguing that the federal Higher Education Act preempted
Pennsylvania’s state-law claims, and that Pennsylvania could not bring claims under the
federal CFPA because the Consumer Financial Protection Bureau (CFPB) had already
sued Navient. After the district court denied the motion, Navient appealed to the United
States Court of Appeals for the Third Circuit.
The 32 attorneys general — led by New York Attorney General Letitia James — are
today supporting 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. Navient is also wrong to argue that the CFPA limits the states’ authority to
bring federal claims in cases where the CFPB has already sued.
Attorney General Balderas joins the attorney generals of New York, Alaska, California,
Colorado, Connecticut, Delaware, Hawai‘i, Idaho, Illinois, Indiana, Iowa, Kentucky,
Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, Nevada,
New Jersey, North Carolina, Oregon, Rhode Island, South Dakota, Tennessee,
Vermont, Virginia, Washington, Wisconsin, and the District of Columbia in filing the
amicus brief.
