JACKSON, Miss. (Legal Newsline) - Student-loan servicer Navient can’t escape a consumer protection suit by the Mississippi Attorney General, even though it’s no longer originating loans in the state and argues federal law preempts the AG’s action.
The Mississippi Supreme Court affirmed a lower court decision allowing Mississippi’s four-count suit to proceed. As in other states, Navient is accused of inducing Mississippi borrowers to take out “risky, expensive loans” that they were unlikely to be able to repay and “deceptive servicing conduct.” The state is seeking an injunction halting the practices as well as disgorgement of “increased revenues and profits” Navient allegedly obtained through improper conduct.
Navient argued the federal Higher Education Act of 1965 covers the practices the state is suing over and preempts the Mississippi consumer protection action. The state’s highest court disagreed, saying states have broad police powers including the right to protect their citizens from unfair business practices. The federal law only covers disclosures, the court went on, not claims like Mississippi’s allegation Navient employees steered borrowers toward more expensive repayment plans instead of advising them to apply for income-based repayment.
“The State’s claims reach far beyond late fees, coupon books, and billing statements,” the court ruled in a March 25 decision.
Navient also argued state consumer protection law doesn’t allow the AG to sue over past conduct, citing Mississippi v. Yazaki, a 2020 decision in which the Mississippi Supreme Court dismissed a state lawsuit against a manufacturer over antitrust allegations the company had settled several years before. In that decision, the court said Mississippi tried to use the consumer protection statute to “impermissibly to address completed wrongs.”
Navient argued the same logic should apply to its student lending, since it no longer originates loans in Mississippi. But the Supreme Court said the manufacturer in Yazaki had pleaded guilty to federal charges and paid hundreds of millions of dollars in fines, making it unlikely it would harm Mississippi citizens again.
“Navient has suffered no consequences, and it remains active in its practice with infinitely more potential to reenter the business of loan origination,” the court concluded, in a unanimous opinion written by Justice Josiah D. Coleman.
Navient’s fight in Mississippi represents another front the company is fighting, along with actions by the Consumer Financial Protection Bureau and multiple states over its lending practices.