On January 18, 2017, the Attorney General (AG) of Washington announced that it filed a lawsuit against the nation’s largest student loan servicer and related entities alleging deceptive lending, servicing, and debt collection practices.
According the AG’s Complaint, filed in King County, Washington Superior Court, the servicer engaged in a number of illegal practices from at least 2003 through 2007, including engaging in deceptive and misleading lending and collection practices. The entity allegedly, among other things, preyed on students attending colleges that had graduation rates of less than 50% and offered them subprime loans, knowing that many students would likely not be able to repay them. According to the AG, the entity also misapplied borrower payments, overcollected on delinquent loans, and failed to adequately inform borrowers of certain obligations, often resulting in monetary penalties. Between 2006 and 2007, the AG claimed that the company held 42% of the private student loan market.
The lawsuit was brought as a result of a lengthy investigation by the states of Washington and Illinois, in conjunction with the federal Consumer Financial Protection Bureau (CFPB). The Complaint seeks civil penalties of $2,000 for each violation of the law, including costs and fees for bringing the action, restitution for affected persons, a declaratory judgment, and an injunction enjoining defendants from engaging in any acts violating Washington consumer protection law.
Enforcement Watch reported on a related action brought by the CFPB against the same entity here.
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