False information provided by federal student loan servicers applying the CARES Act may also lead to liability in light of a recent case allowing public service employees to seek PSLF relief after being misinformed about the applicability of the law.
A recent Forbes article noted our PSLF case’s potential impact. “Student loan borrowers have scored another victory against a student loan servicer for unfair and deceptive practices. And the impact of this decision could be far-reaching.”
Lawson-Ross et al vs. Great Lakes Higher Education Corp., No. 18-14490 (11th Cir. 2020) involved two of our PSLF clients. In this three year long battle, we worked with class and appellate counsel (attorneys Katherine Yanes, Dan Zibel, Brian Shrader and Gus Centrone) who did a fantastic job! This should be helpful for any state consumer law violation – the Higher Educ Act does not preempt state consumer FCCPA/FDCPA claims for affirmative misrepresentations. This was not a failure to disclose case. It revolved around a servicer accused of giving false information. See pages 18-19 for detailed analysis of the difference of a servicer providing false information when asked about a forgiveness program and a failure to disclose.
Here the borrowers were not in default when they asked about their eligibility for Public Service Loan Forgiveness. They believed their servicer who told them they were on track for forgiveness, when in fact their loans were not eligible for such relief.
In holding that Section 1098g of the Higher Education Act (HEA) does not expressly preempt the Borrowers’ claims, the Court remanded the case to the lower court to proceed.
“[T]he Borrowers alleged that when Great Lakes chose to provide them with information it was not required to disclose – about their eligibility for the PSLF Program – it gave false information. If instead the Borrowers had alleged that Great Lakes had a duty to inform them whether they qualified for the PSLF Program, such a claim might well have been preempted. But here, Great Lakes was not required to say anything about loan forgiveness. It could have remained silent instead of giving the Borrowers advice. Holding Great Lakes liable for offering false information would therefore neither impose nor equate to imposing on servicers a duty to disclose information. It would simply require Great Lakes and other servicers to speak truthfully when they choose to speak about a borrower’s qualification for the PSLF Program or any other topic on which servicers have no duty to disclose.”
In this case, the borrowers filed suit alleging that Great Lakes made affirmative misrepresentations to them and other borrowers that they were on track to have their student loans forgiven based on their public-service employment when, in fact, their loans were ineligible for the forgiveness program. Borrowers alleged a variety of claims under Florida law, including the Florida Consumer Collection Practices Act (FCCPA). The district court ruled that Borrowers’ claims were preempted by a provision of the Higher Education Act of 1965 (HEA), which prohibits the application of state law disclosure requirements to loans made under federal student loan programs. The Eleventh Circuit held that the HEA, which expressly preempts state law disclosure requirements, does not preempt Borrowers’ claims in this case. The court also held that Borrowers’ claims are not otherwise preempted. Accordingly, the court vacated the district court’s dismissal of the claims and remanded for further proceedings.