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LEGAL NEWSLINE

Friday, March 29, 2024

Battered and bruised, teachers' class action against Navient heads toward settlement

Federal Court
Financial aid 07

NEW YORK (Legal Newsline) – A “potential series of lawsuits” brought against the nation’s largest student loan servicer is coming to a close with the settlement of a single class action that was severely hobbled by a federal judge last year.

It remains to be seen how former federal officials, a teachers group and private lawyers recovered from the July decision that dismissed all counts of their complaint against Navient except one. But they should be filing their motion for approval of a class settlement sometime in April.

The lawsuit was the brainchild of the American Federation of Teachers and private law firms, as well as the Student Borrower Protection Network – a group started by former federal officials who helped the Consumer Financial Protection Bureau bring litigation against Navient a year earlier.

In an email to the CFPB’s ethics office following his departure, Mike Pierce, who spent seven years at CFPB as senior advisor to student loan ombudsman Seth Frotman, asked whether their new group could participate in October 2018 press events announcing the first lawsuit against Navient brought by teachers.

“(W)e’re now out in the world and our new organization is about to enter into a consulting contract with (AFT) to provide (non-testifying) expert consulting related to servicing practices that harm their members,” Pierce wrote.

“As part of this arrangement, our organization will be advising AFT leadership regarding a potential series of lawsuits against Navient related to Navient’s alleged mismanagement of the Public Service Loan Forgiveness Program.”

But a search of federal court records shows that only one lawsuit was filed by the private firms handling the “potential series.” That suit, filed by Phillips, Richards & Rind in Miami and Selendey & Gay in New York, listed nine teacher-plaintiffs who claimed Navient gave them bad advice regarding the Public Service Loan Forgiveness program. The firms have also sued the Department of Education.

After 120 qualifying payments, student debt is forgiven for public service workers like teachers who are working full-time.

Navient, which is contracted by the Department of Education to advise borrowers struggling with payments, is alleged to have confused those borrowers as to whether PSLF debt-forgiveness would be available to them. For instance, Navient judges its employees on how long they take to resolve a borrower’s concerns – a practice that allegedly steers its reps from suggesting complicated relief programs like PSLF.

The lawsuit was ambitious, seeking class certification nationwide of people who were eligible for PSLF and contacted Navient, as well as four sub-classes of the same in Maryland, Florida, New York and California.

But in less than a year after it was filed, Judge Denise Cote pared all of that down to only the proposed New York class. Out of 15 causes of action, just one based on New York law survived Navient’s motion to dismiss.

“It is not enough that the borrowers incidentally benefit from Navient’s performance under the Servicing Contracts,” Cote wrote. “Such incidental benefit does not rise to the level of intent to permit enforcement.”

Cote used words like “meritless” and “puzzlingly” to describe some of the plaintiffs’ claims. The argument for breach of an implied warranty of authority “makes little sense,” Cote wrote.

She also found certain allegations weren’t made specifically enough to meet standards for fraud claims. Most plaintiffs could only narrow the timeframe of their calls with Navient to within a year, and even though plaintiffs said Navient’s records could show the specific instances, Cote said “It is of little consequence to this motion to dismiss that Navient may have maintained better records of these conversations than the plaintiffs did.”

A California plaintiff actually specified her calls down to the month, but the state law under which her claims arise does not cover loan servicers, Cote ruled.

Left standing was a claim for violation of New York Consumer Protection From Deceptive Acts and Practices Law.

The two sides informed Cote of a settlement earlier this year and appear to be working out details. They have until April 24 to submit the settlement and motion for class certification, unless they ask for another extension.

Meanwhile, Navient continues to fight the CFPB lawsuit initiated during Frotman’s and Pierce’s time at the agency.

A former CFPB researcher was recently given the green-light to testify against the agency.

From Legal Newsline: Reach editor John O’Brien at john.obrien@therecordinc.com.

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