AFT Motion Rebuts MOHELA’s Claims That It Is Immune From Prosecution, Warns Court That MOHELA Violated Federal Contract
September 26, 2024 | WASHINGTON, D.C. — AFT filed a brief last night in AFT v. MOHELA urging a federal judge to reject MOHELA’s efforts to keep this case out of the District of Columbia’s state court. MOHELA removed the case from the D.C. court to federal court and, in doing so, claimed it was immune from prosecution under D.C.’s Consumer Protection Procedures Act (CPPA), which prohibits unfair or deceptive trade practices. AFT brought this lawsuit to stop MOHELA from continuing its harmful servicing practices in violation of the CPPA.
The AFT is represented by the Student Borrower Protection Center (SBPC), National Consumer Law Center (NCLC), and Selendy Gay PLLC.
As AFT’s brief explains:
MOHELA, one of the nation’s largest student loan servicers, subjects borrowers to a labyrinthine system of deceit, misinformation, costly delays, and egregious customer service. . . . MOHELA has flagrantly and repeatedly flouted the District’s [consumer protection] law, and for the reasons explained below, it must be held accountable in the District’s courts.
A copy of AFT’s brief is available here: https://www.courtlistener.com/docket/69090685/27/american-federation-of-teachers-v-higher-education-loan-authority-of-the/
A fact sheet outlining MOHELA’s Motion and AFT’s response is available here: https://protectborrowers.org/wp-content/uploads/2024/09/FACT-SHEET-Accountability-and-MOHELA-Motion-for-Removal.pdf
MOHELA’s claim that it is immune from prosecution is outrageous and unsupported by law,” said SBPC legal director Winston Berkman-Breen. “MOHELA makes a variety of assertions—sovereign immunity, federal contractor immunity, and preemption—that boil down to a single defense: We are above the law. This should sound an alarm for policymakers responsible for protecting the millions of borrowers who are still enduring MOHELA’s unacceptable and unlawful servicing practices. Borrowers deserve assurances that the companies the U.S. Department of Education pays hundreds of millions of dollars a year to service their loans are held accountable when they break the law.
AFT’s brief also explains that, in addition to being contrary to law, MOHELA’s claims of immunity may violate its servicing contract with the federal government. The company’s latest contract contains the following provisions:
[MOHELA] acknowledges that it is not the U.S. Department of Education, and is not acting as the U.S. Government under this Contract. As such [it] acknowledges that any claim or defense of Sovereign Immunity or Qualified Immunity is not applicable to work performed under the Contract and any Task Order issued under the Contract.
Although the courts will have to decide whether MOHELA’s immunity claims are valid, the U.S. Department of Education must decide whether the company has violated the letter and the spirit of its agreement to service federal student loans by claiming it is above the law.
In a filing submitted to the court last night seeking to dismiss AFT’s lawsuit, MOHELA appears to acknowledge that the arguments it first offered to escape the jurisdiction of DC Superior Court were a bridge too far—MOHELA no longer asserts that it is immune from prosecution by virtue of its status as a federal contractor. However, it does restate claims that it cannot be prosecuted by AFT because of its special status as a creature of Missouri and because the Higher Education Act may preempt some claims made in this case. Taken together, MOHELA’s new brief is an additional admission that MOHELA believes it is above the law.
Background
AFT sued MOHELA under the D.C. CPPA in D.C. court on behalf of itself, its members, and the general public. The lawsuit alleges that, due to MOHELA’s unlawful servicing practices, including its ongoing call deflection scheme, millions of borrowers have missed payments, been overcharged, had their applications for debt cancellation mishandled, and received inaccurate advice. As the lawsuit explains, MOHELA’s servicing failures are not merely nuisances; they are illegal.
Further Reading
A copy of the lawsuit filed in AFT v. MOHELA is available here: https://protectborrowers.org/mohela-lawsuit/
A fact sheet outlining the specific claims brought by AFT against MOHELA is available here: https://protectborrowers.org/mohela-factsheet/
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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.