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Class Action Takes Issue with Navient Student Loan Collection Tactics

A Minnesota consumer claims in a proposed class action lawsuit that Navient and several of its debt collection agents violated the Fair Debt Collection Practices Act (FDCPA) by misrepresenting the status of her student loan debt.

The Defendants:

  • Navient Corporation – loan management, servicing and asset recovery company
  • Navient Solutions, Inc. – formerly known as Sallie Mae
  • Navient Credit Finance Corp. –  a subsidiary of the above Navient branches
  • Delta Management Associates, Inc. – a debt collection agency specializing in “providing comprehensive, strategic collection and portfolio management solutions”
  • Rausch, Sturm, Israel, Enerson & Hornik, LLC – an agent of Navient and “the firm for Navient Credit Finance Corporation” that has authorization to collect on and/or settle consumers’ accounts
  • Doe Defendants 1-10

Background

The 18-page lawsuit says the plaintiff registered for digital photography classes in June 2007 at Sanford-Brown College for which she took out roughly $18,225 in loans to cover. These funds were disbursed to the plaintiff by the Department of Education and assigned to Navient —known at the time as Sallie Mae — for servicing, the complaint continues. After a period of time, the plaintiff claims she became unable to pay the loans, which were placed into default status.

Navient and the other defendants’ alleged conduct

Once the plaintiff’s defaulted loans—now officially “debts” as far as the FDCPA is concerned—were purchased, she allegedly received a letter from defendant Rausch, Sturm, Israel, Enerson & Hornik. In that notice, the firm purported to have authorization to settle her account for the discounted rate of $8,419.75, so long as she made her first payment of $4,209.88 by March 26, 2015 and a second payment of $4,209.87 by April 24, 2015.

In March 2015, the lawsuit says, the plaintiff accepted the settlement offer and sent an $8,419.75 check to Navient Credit Finance. Days later, the plaintiff received a confirmation letter from Rausch, Sturm, Israel, Enerson & Hornik stating, in capital letters, that “YOUR ACCOUNT HAS BEEN SETTLED.” In May 2016, the plaintiff’s account status online noted that all three of her student loans were “PAID IN FULL,” the lawsuit says.

According to the plaintiff, this all turned out to be a lie.

Wage Garnishment Threats

A month after Navient purported to the plaintiff that her account was taken care of, the woman received a communication from United Student Aid Funds, Inc. threatening to withhold her wages should she fail to set up a repayment agreement with defendant Delta Management Associates. Here lies the crux of the suit’s allegations:

“Upon information and belief, Rausch misrepresented the nature and legal status of [the plaintiff’s] student loan debt, in May or early June 2016, shortly before renewed collection attempts by Delta commenced,” the lawsuit alleges. “Upon information and belief, Rausch’s misrepresentations of the legal status of the debt (failing to report that the debt was settled), has leg to wrongful continued attempts at collection of the debt, including, now, wrongful wage garnishment.”

From here, the plaintiff allegedly received another communication from Delta Management Associates informing her that it had commenced “administrative wage garnishment enforcement” by which her employer was instructed to “withhold from her and remit a sum of up to 15 percent of her disposable income.”

Alleged FDCPA Violations: “Down the path of extortion.”

The lawsuit claims Delta Management Associates violated the FDPCA by failing to send to the plaintiff a notice of proposed garnishment, which should include an explanation of the debtor’s FDCPA rights, before instructing her employer to withhold wages. Similarly, the case also alleges Delta unlawfully failed to allow the plaintiff to inspect and copy records pertaining to her debt, as well as enter into a written repayment agreement. Lastly, under the FDCPA, a debtor has the right to object to a debt collector’s actions, i.e. wage deductions, and demand a hearing on the issue. This right was not afforded to the plaintiff, the lawsuit alleges.

Sadly, the complaint bleakly claims that no matter what the plaintiff did, she would still be at the mercy of the defendants:

“Thus, upon information and belief, no matter what evidence [the plaintiff] would have presented (including clear settlement of her debt and accounts statement reflecting “PAID IN FULL”), the Delta, USA Funds, and ECMC trio were not going to honor [the plaintiff’s] settlement of her claim, were going to attempt to extort more money from [the plaintiff], and have now continued down the path of extortion by wrongfully garnishing [the plaintiff’s] wages,” the case reads.

Is this the same as other recent legal action against Navient?

It’s important to note that this latest lawsuit does not make the same allegations as previous cases filed against Navient by the Consumer Financial Protection Bureau and an individual in Florida. Since we’ve reported on those particular cases, ClassAction.org has received many complaints and comments from consumers across the country about Navient’s business practices. We feel it’s necessary to bring to light any legal action filed against Navient to provide our readers with the fullest scope possible of any developments by which they may be affected.

Who Is the Suit Looking to Cover?

The lawsuit proposes to cover four individual classes:

  • Delta FDCPA Class – “All individuals who reside in the United States, who since April 3, 2016, were subjected to Delta’s unfair and deceptive debt collection practices, as alleged below, which violates the FDCPA, and who suffered damages therefrom.”

  • Rausch FDCPA Class – “All individuals who reside in the United States, who since April 3, 2016, were subjected to Rausch’s unfair and deceptive debt collection practices, as alleged below, which violates the FDCPA, and who suffered damages therefrom.”

  • Breach of Contract Class – “All individuals who reside in the United States, who since April 3, 2011, were made an offer by Navient to settle their student loan debt, accepted the offer, and have suffered damages due to the debt not being settled.”

  • Unjust Enrichment Class – “All individuals who reside in the United States, who since April 3, 2011, have paid money to Navient after Navient’s unjust and inequitable conduct, including falsely offering to settle outstanding student loan debt, to receive an economic benefit from the individuals.”

The full complaint can be read below.

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