Consumer Protection Lawsuit Opens a New Front in the Fight to Demand Justice for Student Loan Borrowers
February 12, 2024 | WASHINGTON, D.C. — Friday, a court approved the settlement of the class action brought by the National Consumer Law Center, Justice Catalyst Law, and Flitter Milz, P.C. against Maximus, Inc. (NYSE: MMS). This lawsuit sought to hold Maximus, one of the U.S. Department of Education’s largest student loan contractors—a firm operating as “Aidvantage” and the “Default Management and Collection System” (Default Resolution Group)—accountable for illegally collecting against borrowers who sought debt relief after being defrauded by for-profit colleges.
In response, SBPC Legal Director Winston Berkman-Breen released the following statement:
“This settlement is a huge victory for student loan borrowers at large and sends a message to every student loan company in America—if you prey on borrowers, you will face justice. For too long, Maximus has hidden in the shadows; its illegal and abusive practices disguised as the actions of a government entity. There is no more important time than as tens of millions of borrowers are returning to repayment to reaffirm that borrowers can seek justice directly from these private-sector companies when their rights are violated.
“The victims of Maximus’s abuses in this case are borrowers who have experienced some of the most predatory aspects of the student debt crisis—defrauded by for-profit schools, denied debt relief by the former Trump Administration, and cheated out of their last dollar by a rogue government contractor. We commend our partners at the National Consumer Law Center, Justice Catalyst Law, and Flitter Milz, P.C. for their success in bringing this groundbreaking case to protect borrowers.”
The case originates from when Jaimaria Bodor, a former Corinthian Colleges student, initiated a lawsuit against Maximus, Inc., for illegally seizing her tax refund. In her complaint, she alleged that the company ignored its duty to stop collecting against her—a right she is guaranteed under rules that protect borrowers defrauded by for-profit colleges. In the process, she says Maximus violated a federal consumer protection law, known as the Fair Debt Collection Practices Act.
The federal judge in this case denied Maximus’s attempt to be shielded from liability. The company had argued that, as a government contractor, it was entitled to the government’s sovereign immunity protection. The court determined that this was not a defense against liability for unlawful debt collection.
Maximus’s actions, such as those alleged in this case, led a federal magistrate judge in California in a separate action brought by the Project on Predatory Student Lending and Housing & Economic Rights Advocates to take the unusual step of holding then-Education Secretary Betsy DeVos in contempt of court for failing to halt collection efforts against tens of thousands of student loan borrowers who were defrauded by Corinthian Colleges.
The docket in the case against Maximus, Inc. is available at: https://www.courtlistener.com/docket/16569552/bodor-v-maximus-federal-services-inc/
A blog post about the litigation authored by SBPC Executive Director Mike Pierce on the litigation is available at: https://protectborrowers.org/a-new-debt-collection-lawsuit-gives-us-a-glimpse-at-the-future-of-student-loan-servicing-for-tens-of-millions-of-borrowers/
More in-depth background about Maximus and a full investigation of its failures authored by the Communications Workers of America and SBPC is available here: https://protectborrowers.org/new-investigation-reveals-evidence-of-widespread-failure-and-abuse-by-worlds-largest-student-loan-company
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About Student Borrower Protection Center
Student Borrower Protection Center (SBPC) is a nonprofit organization focused on eliminating the burden of student debt for millions of Americans. We engage in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance racial and economic justice.
Learn more at protectborrowers.org or follow SBPC on Twitter @theSBPC.