Conflicts Can And Should Be Managed Constructively
We will discuss some cases filed against bureaus and creditors while drawing lessons for borrowers to better frame their legal matters. The entire process of credit management and the possible disputes arising from misreporting can lead to huge legal battles. At the same time, you should know that small firms cannot respond to cartels that exist in the lending industry.
The Case of Navient, an Education Loan Provider
On May 19, Navient, an education loan provider, filed a summary judgment against the Consumer Financial Protection Bureau (CFPB). This lawsuit started approximately three years ago. The background of the case is that CFBP sued Navient because Navient, in their view, was pushing customers towards forbearance instead of income-driven options.
Typically, when you get a student loan, you have several payback options, in case you have trouble paying back the loan. However, Navient, according to CFPB, was influencing borrowers towards taking a forbearance. Forbearance is a process where payments are temporarily suspended, but the interest continues to build up.
There is an IDR option as well, which is an income-driven option. So, there are options available for individuals to pay less based on their income level. The counter-evidence that Navient presented was that CFPB had brought forward no evidence to support its claim. The CFPB filed a legal brief in March of 2019, and once that was explored, it actually supported the case of Navient.
There was a chart in brief, which is used by Navient’s employees to help borrowers choose between different repayment options. This chart essentially reflects Navient’s position, as opposed to other industry players, and Navient is placed at the bottom of the list. This means that the firm does not encourage individuals towards forbearance because if it did, it would have been on top of the chart instead of the bottom. The chart also stated that forbearance should not be discussed unless all other options have been exhausted.
Further, it was also revealed that CFPB cherry-picked evidence in the case of Navient. When asked by Navient to identify the borrowers that were harmed by their business practices, CFPB brought fifteen witnesses. This gave Navient a chance to examine their cases. Upon examination, it was revealed that one of the borrowers had lied to Navient about his income to become eligible for another repayment option.
In the motion for summary judgment, CFPB stated that they no longer seek to prove that Navient affirmatively pushed borrowers into forbearance, and it does not seek to keep borrowers in the dark. The motion also states that CFPB is just using the lawsuit to impose new student loan regulations instead of going through a formal rulemaking process.
Hence, this has become a usual practice in this industry. It has been seen that CFPB picks on specific sectors from time to time. In our view, CFPB picks on companies that are too small to defend themselves. In other words, they pressurize companies with heavy lawsuits and then offer to settle with them at half the price.
In the credit repair industry, debt settlement industry, or student loan, we have seen examples like these earlier as well. It can, therefore, be said that CFPB is going about these cases in an unjust and immoral manner. So, kudos to Navient for staying in their ground.
The Case of Lexington Law Firm
Another example is of Lexington law firm, which has been standing their ground in the repair industry. CFPB’s actual job is to protect consumers. They have two main divisions; the enforcement division and the consumer division. While the consumer division is doing its job fine, the enforcement division is being poorly managed, and it does not do its job well. The agenda that CFPB has is to get the law enforced the unconstitutional way by making cases on firms that do not even exist.
The Case of Transunion versus borrowers
This is essentially a pay lenders issue, but Transunion is the one that gets sued. So, it’s important to know the legalities when you are talking about the Fair Credit Reporting act. You need to be educated about who owns the debt and who holds the paper. The case here is that two individuals namely, Joseph Denan and Adrienne Padgett, took loans from online payday lenders that are affiliated with Native American tribes.
Denan took a loan of $1600 from Plain Green LLC, and the interest rate was more than 300% because it’s a payday loan. The loan contract has been worded in a very questionable manner. As per the law, when a contract is drafted, the practices have to be based on the state in which the consumer is located, which in this case is New Jersey.
The case was filed when Denan stopped making monthly payments to the lender, and they reported it to TransUnion. Next, while Denan borrowed $1600, Plain Green LLC reported that he owed them $2,600. The borrower, therefore, disputed the report accuracy, and TransUnion investigated the information.
The other consumer Padgett is from Florida, and she borrowed $900 from Great Plains and $1600 from Plain Green LLC. Each loan has an interest rate of over 300% subject and governed by tribal law, not to where the consumer resides. Once Padgett stopped making the monthly payments, the lenders reported to TransUnion delinquent account of $2600 and $1042. Luckily, she had also reported negative information reported to her credit.
Hence, the borrowers brought a class action lawsuit against TransUnion, alleging that it violated two provisions of the Fair Credit Reporting Act, which requires consumer reporting agencies to assure maximum possible accuracy of the information contained in the credit report. So, while the borrowers sued Transunion, they should have sued the payday lender.
The premise of the case should have been that the contracts have the verbiage that does not pertain to the state they reside in. Hence, they had a good argument if they had gone after payday lenders directly, but instead, they decided to sue TransUnion over a violation of the Fair Credit Reporting Act. The District Court dismissed the case, finding the cited provisions of the Act did not require Transunion to verify the legal validity of the reported debts. Hence the borrowers lost the case.
There are some lessons we have learned from the proceedings of this case. For instance, we have learned that it is best to file a dispute of misinformation for the amount of the debt directly with the creditor. It is not the obligation of the reporting agencies like TransUnion or Experian to validate the debt. We also learned that if the borrowers had engaged a lawyer who was more informed about the FDCPA regulations, he would have better framed the case.