Navient Corp., the largest servicer of student loans in the U.S., was sued by a U.S. regulator over allegations that the company “systematically” cheated borrowers, Bloomberg News reported yesterday. Navient, formerly part of Sallie Mae, failed to properly service private and federal loans, provided incorrect information to borrowers, improperly processed payments and didn’t respond to complaints, the Consumer Financial Protection Bureau said in a statement Wednesday announcing the lawsuit. “For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans,” CFPB Director Richard Cordray said in the statement. Navient said in a statement that the allegations are “unfounded” and that it rejected an ultimatum from the consumer agency to settle before the presidential inauguration of Donald Trump. Navient said the suit’s timing “reflects their political motivations.”
Three influential Senate Democrats on Tuesday said they oppose converting the Consumer Financial Protection Bureau into a bipartisan commission because it could bring the agency’s operations to a halt, MorningConsult.com reported yesterday. The remarks come amid concerns that President-elect Donald Trump will fire CFPB Director Richard Cordray. Senate Minority Leader Chuck Schumer (N.Y.), Banking Committee ranking member Sherrod Brown (Ohio) and Sen. Elizabeth Warren (Mass.) said that changing the agency’s structure would defeat the wishes of lawmakers who passed the 2010 Dodd-Frank Act and wanted the CFPB to stay strong and independent. For years, Republicans have pushed for a transition to a commission-based structure for the CFPB. Conservative lawmakers and CFPB critics also have argued that Democrats will eventually come around to the same point of view because they fear the impact of a single director appointed by a Republican president like Trump.
“I have a great deal of trouble with this business model,” Justice Sonia Sotomayor said yesterday near the outset of oral argument in the Supreme Court on Midland Funding LLC v. Johnson, the case to decide whether debt collectors violate the federal Fair Debt Collection Practices Act by purchasing stale claims for pennies and then filing proofs of claim when the underlying debt is barred by the statute of limitations. According to an analysis by ABI editor-at-large Bill Rochelle, the observation by Justice Sotomayor was the high point for debtors, because the justices seemed divided along the usual ideological lines. The Court will not likely be split 4/4, because Justice Stephen G. Breyer, who is often allied with the liberal wing on bankruptcy cases, repeatedly seemed concerned that ruling for debtors would transfer disputes into federal district courts that should be in bankruptcy courts. Read more.
Watch a video recap of Rochelle and ABI Resident Scholar Prof. Drew Dawson discussing yesterday’s Supreme Court oral argument in Midland Funding LLC v. Johnson.
(1) Whether the filing of an accurate proof of claim for an unextinguished time-barred debt in a bankruptcy proceeding violates the Fair Debt Collection Practices Act;
(2) whether the Bankruptcy Code, which governs the filing of proofs of claim in bankruptcy, precludes the application of the Fair Debt Collection Practices Act to the filing of an accurate proof of claim for an unextinguished time-barred debt.
Click here to review briefs, petitions and analysis of the case. ABI editor-at-large Bill Rochelle will be covering the oral argument to publish a special edition of Rochelle’s Daily Wire and provide a video recap via ABI’s Facebook page later in the day.
The U.S. Supreme Court on Friday agreed to decide whether firms collecting on debt they bought for pennies on the dollar can be held liable in lawsuits brought by debtors they targeted under a federal law cracking down on debt collectors' abusive practices, Reuters reported. The justices agreed to review a lower court's decision to dismiss a consumer class action lawsuit against Santander Consumer USA Holdings Inc. over allegations it violated the Fair Debt Collection Practices Act. The case hinges on the definition of "creditor" and "debt collector" and whether a company that buys debt should be treated as a creditor and therefore not subject to the law. Four Maryland residents who defaulted on car loans filed a proposed class action lawsuit against Santander in 2012 in federal court alleging violations of the debt collection law, such as misrepresenting debt loads and bypassing debtors' lawyers. The debts had been sold to Santander, a Dallas-based vehicle-financing and lending company owned in part by a subsidiary of Banco Santander, the euro zone's second-largest bank by market value. Santander then tried to collect on the loans. The U.S. Court of Appeals for the Fourth Circuit threw out the lawsuit last March, saying that the law applied only to debt collectors, and Santander became a creditor when it purchased the loans. The Maryland residents told the Supreme Court the 4th Circuit's reasoning would "hamper both government and private efforts to combat abusive debt-collection practices." They also noted that appeals courts are divided nationwide on the issue, with some calling debt buyers creditors and others calling them debt collectors. The case is Ricky Henson et al v. Santander Consumer USA, Inc. et al, in the Supreme Court of the United States, No. 16-349. Read more.
In related news, the Supreme Court tomorrow will hear oral argument in Midland Funding, LLC v. Johnson, No. 16-348, in which the court will be looking at:
(1) Whether the filing of an accurate proof of claim for an unextinguished time-barred debt in a bankruptcy proceeding violates the Fair Debt Collection Practices Act;
(2) whether the Bankruptcy Code, which governs the filing of proofs of claim in bankruptcy, precludes the application of the Fair Debt Collection Practices Act to the filing of an accurate proof of claim for an unextinguished time-barred debt.
For more information on the case, please click here.
Once called the king of downtown Orlando, developer Cameron Kuhn filed for personal chapter 7 bankruptcy yesterday, the Orlando Sentinel reported today. He declared $22.8 million in liabilities to various corporations. Kuhn bought up more than 20 properties in Orlando by 2007, when real estate markets crashed and the Great Recession began. Over the years, Kuhn was best known as one of the developers who renovated the Church Street Station entertainment district, and cleared several blocks of land to build the massive Plaza office and condo complex on South Orange Ave. He previously filed bankruptcy for one of his companies related to the Plaza in 2010, declaring $10 million in debts and in assets.
Most student loan borrowers are young adults, but the number of older Americans with education loans has quadrupled in the last decade. Many of them say that difficulties with loan servicers are adding to their debt-management struggles, the New York Times reported today. Americans age 60 and older are the fastest-growing group of student loan borrowers, according to a new report from the Consumer Financial Protection Bureau that examines borrower complaints. There are now about 2.8 million Americans who are 60 or older with at least one student loan. Some older borrowers are carrying their own student loans, but most have education debt taken out on behalf of their children or grandchildren, either by borrowing the money themselves or co-signing loans with the student as the main borrower, the report found. The average debt for such borrowers has doubled over the last 10 years, to about $24,000. Most of the borrowers have other types of debt as well, including mortgages and credit card debt. Read more.
