|note: Scott Walker does not actually want|
to help you with your student loans.
The case is Riel v. Navient Solutions, Inc., (16 CV 1191, ED WI) the plaintiffs, represented by me, are suing Navient for illegal collection practices involving student loans. The plaintiffs are alleging that Navient violated the Wisconsin Consumer Act by calling the debtor after he retained counsel, by calling too much and at the wrong times, by contacting relatives, and by otherwise engaging in unsconscionable behavior.
Navient, as defendants do, filed a motion to dismiss the case. Navient said the entire case had to be dismissed, as well as attacking certain individual claims.
The plaintiffs were, as noted, suing in part for a court order enjoining Navient from collecting the loans in question, based on what was alleged to be Navient's unconscionable conduct. Navient argued that the plaintiffs couldn't bring that claim because (they said) section 425.107 of the Wisconsin Statutes is defensive only, The Court agreed with that, finding that Subchapter 1 of chapter 425 applies only to actions brought by a creditor, and so holding that the defense of unconscionability can only be raised by a debtor as a defense to such an action, rather than affirmatively. (The Court said that cases where plaintiffs have been allowed to raise such issues affirmatively, such as Drogorub v. Payday Loan Store of WI, Inc., 826 N.W.2d 123 (Wis. Ct. App. 2012) did not compel a different result.)
Navient's larger attack was against the claims under chapter 427 for illegal collection practices. Navient asserted that the Higher Education Act pre-empted the Wisconsin Consumer Act, in its entirety, as well as pre-empting specific claims the plaintiffs made.
On pre-emption as a whole, the Court disagreed, citing an earlier case brought by Attorney Pagel, Weber v. Great Lakes Educ. Loan Servs., Inc., No. 13-CV-291-WMC, 2013 WL 3943507 *4 (W.D. Wis. July 30, 2013). What Weber and now Riel held was that the Higher Education Act only pre-empts provisions of state consumer law which directly conflict with or limit HEA responsibilities and rights:
it is technically possible to comply with the WCA's anti-harassment provisions and the HEA regulations. See Wis. Stat. § 427.104(g) and (h). ... the Court finds that a prohibition on harassment offers no obstacle to the enforcement of those regulations, especially in light of the presumption against preemption. Plaintiffs' allegations reveal that Navient's call volume far exceeded the minimum requirements of Section 682.411.
The ruling allows the plaintiffs to continue to seek damages for the frequency of phone calls, while denying the right to seek damages for calls made to the debtor after the debtor retained a lawyer.
The case is still at the early stages, but surviving a motion to dismiss is a significant event in any lawsuit, let alone one dealing with the third rail of debtor law, student loans. In addition, this marks the second time that a federal court in Wisconsin has ruled on HEA pre-emption of the Wisconsin Consumer Act, and each suit has squarely decided that where compliance with both laws is possible, the WCA is not pre-empted, making clear that student loan debtors enjoy the protection of the WCA in Wisconsin. This is significant because chapter 427 applies to any collection actions taken against someone while they are in Wisconsin, even if the loan was originated somewhere else, so students who move to Wisconsin (or come back home after college) will be protected by the WCA's regulations.