Consumer Financial Protection Bureau Takes on Student Loan Servicing

We are in the midst of graduations across the nation and it can be a bleak picture for graduates looking for employment. Finding a job in a specific field can be difficult, but students must also take into account looming student loan payments. Large student loan payments prevent students from making other financial investments and this has long-term repercussions for the student borrower as well as the entire economy.

The Consumer Financial Protection Bureau recently announced that it is soliciting comments from the public about borrower experiences with student loan servicing. CFPB Director Richard Cordray stated that “[t]he inquiry seeks to determine if the student loan servicing industry is doing things that make repayment more complicated and more costly for consumers.

The CFPB has taken an active role in monitoring and regulating various consumer industries such as payday loans, mortgage servicing, and credit cards. It is not surprising to learn that in light of the staggering statistics about student loan debt, the CFPB is now taking action.

There is a lot of room for improvement in terms of regulating lenders and servicers. It is good to know that the voices of student borrowers are finally being heard. Hopefully those facing crushing debt loads will soon find some relief.

 

Rachel Gallegos

Rachel Gallegos

Lead Consumer Advocate, Steve Harvey Law

The Corinthian Colleges Closure and Debt Cancellation Debacle

Any discussion about student loan rip-offs should begin with Corinthian Colleges. The recent closure of this for-profit company left thousands of students stranded with no way to complete the education they had been promised and for which they took on crushing debt loads.

The Department of Education has announced that students who were enrolled or recently withdrew from school will be forgiven their federal loans but only if they forego credits they already earned. Students who have already graduated get no such relief. According to US News & World Report, some of the former students are also now challenging repayment of their student loans based on claims of fraud.

The closing of Corinthian Colleges brings up the issue of debt cancellation in the student loan context. If you have federal student loans, in certain circumstances such as school closings your debt can be canceled. You must be enrolled at the time of closing or have withdrawn from the school within 120 days of the closing.

Prior to the closure of Corinthian Colleges, the Consumer Financial Protection Bureau announced that $480 million in loan forgiveness will be made available for students who took out Corinthian Colleges high-cost private student loans. This is highly unusual as the protections and safeguards offered for federal loans normally do not exist for private loans. Loan forgiveness and debt cancellation are rare in the private loan context. Students are ordinarily left to negotiate directly with the private lender in hopes that the payments can at least be an amount that is affordable each month.

Corinthian Colleges is the tip of the of the student loan crisis iceberg. The student loan program in this country is not serving us well and cries out for reform.

 

RG-3Rachel Gallegos

Lead Consumer Advocate, Steve Harvey Law

 

The Foreclosure Crisis: It’s Not Over Yet, and Not Even Close in NJ

The Philadelphia Inquirer reports that 1 in every 234 homes is in some stage of foreclosure in New Jersey. This is a 17% increase over 2014 and clearly shows that the crisis in not over yet. While New Jersey is unique in its rate of foreclosure, the issue still plagues many homeowners nationwide.

In New Jersey, the high rate of foreclosures is also due to “robo-signing” issues in recent years. Those legal issues created a back-log of foreclosures and the flood gates have since opened. Homeowners in New Jersey and nationwide are also still fighting against decreased property values, unemployment, illness, and mounting debt.

Foreclosures destroy communities and do not benefit the homeowner or the lender. A resolution in which the homeowner stays in the home and continues to make payments is in everyone’s best interest. There are many options available for homeowners to resolve a foreclosure but the process can be overwhelming. Families facing foreclosure should immediately contact an attorney or housing counselor to seek assistance.

 

RG-3Rachel Gallegos

Lead Consumer Advocate, Steve Harvey Law

 

Education at a Cost

Student loan debt plagues the nation. Over 40 million people in the United States have student loans and approximately 7 million borrowers are in default. Higher education leads to higher paying and more satisfying work for life, but a crushing debt load can consume the pay and kill the satisfaction.

In this article, the New York Times highlights the problems with student loan counseling offered to students. Research has found the information currently provided to students to be confusing and irrelevant. It also assumes a knowledge base that simply isn’t there.

Students need to be educated on the ins and outs of student loans before being asked to take on tens of thousands of dollars in debt. Much time is spent telling students that higher education is crucial to their success, but too often the crushing debt incurred to achieve that education drastically alters the future for students after graduation.

The system needs an overhaul. There are basic changes that can be made in this arena such as more financial counseling while student are in school, face-to-face contact with experts, and different ways of communicating needed information such as videos. Schools and lenders must do a better job educating students about the debt they are taking on and what it means for their future. Because their future is our future.

 

– Rachel Gallegos

 

Lawyers’ Climate Change Campaign Reaches West Coast for Earth Day

 

In early 2014, a small group of lawyers in Philadelphia began a campaign to enlist the support of the legal community for action on climate change. That campaign took root with the leadership of the Philadelphia Bar Association under the name A Call to the Bar: Lawyers for Common Sense on Climate Change.

The goal? To protect our children and future generations from the catastrophic effects of climate change by reducing greenhouse gas emissions through carbon pricing, such as carbon tax, cap-and-trade, or fee and dividend. Virtually all knowledgeable people agree that carbon pricing is critical. Citizens must demand it, government must deliver it. Lawyers can lead the way.

Yesterday, April 21, 2015, the campaign reached the West Coast, with the publication by the Oregon State Bar of my article “Just a Theory on People and Climate Change.”

I am immensely proud to have the support of lawyers in Oregon.

In coming months, you can expect to hear more about our work with lawyers around the country, as we turn common sense into public policy.

Lawyers, law students, and non-lawyers can support our efforts by going to our web site, www.calltothebar.org and signing our petition. We cannot do it without you. Sign the petition now.

-Steve Harvey

Leading Jurists, Scholars, and Advocates Say Unrelenting CO2 Emissions Violate International Law and Must Be Reduced to Prevent Catastrophe

A group of prominent jurists, scholars, and advocates on March 1, 2015, adopted the Oslo Principles on Global Climate Change Obligations. The Principles are based on the undeniable fact that “[t]he threats [to the Earth from climate change] are grave and imminent,” and the inescapable conclusion that “[a]voiding severe global catastrophe is a moral and legal imperative.” The Principles “set out the legal obligations of States and enterprises to take the urgent measures necessary to avert climate change and its catastrophic effects.” Essentially, they call for reduced CO2 emissions by States and enterprises.

Principle 1, called the “Precautionary Principle,” states that: “1) GHG emissions be reduced to the extent and at a pace necessary to protect against the threats of climate change that can still be avoided; and 2) the level of reductions of GHG emissions required to achieve this, should be based on any credible and realistic worst-case scenario accepted by a substantial number of eminent climate change experts.”

The Oslo Principles, while not binding, serve as an important reminder that impeding disaster from climate change caused by CO2 emissions is not just an environmental and moral problem, it is a legal problem.

Anyone concerned about what government and the law should do about climate change should review the Principles, which can be found here. The commentary to the Principles can be found here

 

– Stephen G. Harvey

 

New Federal Study of Consumer Arbitration Clauses Finds That Consumers Lack Understanding and Clauses Limit Class Relief

On March 10, 2015, the Consumer Financial Protection Bureau (“CFPB”) issued the second part of a long awaited study on arbitration clauses in consumer financial services contracts.[1]

CFPB head Richard Cordray summarized two key study findings. “Tens of millions of consumers are covered by arbitration clauses, but few know about them or understand their impact,” said Cordray. “Our study found that these arbitration clauses restrict consumer relief in disputes with financial companies by limiting class actions that provide millions of dollars in redress each year.

So what will the CFPB do about arbitration clauses and their effect on class actions? The Dodd Frank Act mandated that the CFPB issue regulations consistent with the study. “Now that our study has been completed, we will consider what next steps are appropriate,” said Cordray.

Consumer advocates are predicting that the CFPB will use the study as a support for prohibiting arbitration clauses: “The findings of the CFPB’s study are crystal clear. These clauses are written by corporations to set up a secret and lawless process that prevents consumers from holding corporations accountable for unlawful conduct. The CFPB should act quickly to ban forced arbitration in consumer financial contracts,” said National Consumer Law Center attorney David Seligman.

Predictably, many industry groups favor arbitration clauses and argue that they should be preserved, even if (and precisely because) they are used to defeat class actions. It may be too early to tell how this will all be resolved, but there is a clear sense that the momentum on this issue has shifted in favor of consumers.

– Stephen G. Harvey

[1] The first part of the CFPB study was released on December 12, 2013.

 

The Twin Obstacles Of Standing And State Secrecy Live On In Surveillance Challenges

Supreme Court to Clarify Pregnant Workers’ Rights

The U.S. Supreme Court recently heard oral argument in Young v. United Parcel Service, Inc.,[1] a case that is expected to clarify employers’ legal obligations when pregnant women with work limitations seek workplace accommodations.

Petitioner Peggy Young was a driver for UPS, a positon that required her to lift up to 70 pounds. During her pregnancy, her doctor advised her not to lift more than 20 pounds, and she asked UPS to placer her on “light duty” – something UPS provided for employees who (1) had been injured on the job, (2) were disabled, or (3) had lost their commercial driver’s licenses. UPS denied Young’s request, reasoning that Young’s pregnancy was neither a disability nor an on-the-job injury, and put her on unpaid leave for the next nine months.

Young sued UPS under the Pregnancy Discrimination Act (“PDA”), alleging UPS’ policy discriminated against pregnant women. Since the PDA became law in 1978, it has been illegal to treat women workers unequally just because they become pregnant. But it has remained unclear whether employers who grant light-duty work accommodations to temporarily disabled workers must also provide light-duty accommodations to women whose doctors place similar restrictions on the work they can do during pregnancy.

Young argued that UPS’ policy is illegal under PDA, because it treats pregnant workers less favorably than non-pregnant workers who are similar in their ability or inability to work. UPS (which has since changed its policy), argued that Young is seeking is “special treatment for pregnant employees” — something the PDA does not require.  UPS pointed out that even the Justice Department has in the past defended a US Postal Service policy that treats pregnant women in substantially the same way. (The Justice Department said that policy is now being reconsidered.)

Both the district court and the U.S. Court of Appeals for the Fourth Circuit ruled in favor of UPS. Women’s rights advocates and the U.S. Department of Justice have now lined up on Young’s side. The Supreme Court’s ruling should clarify the rights available to pregnant women, as well as what is required of employers, under the PDA.

[1] No. 12-1226 (argued Dec. 3, 2014).

Pennsylvania Supreme Court to Decide Fresh Consideration Rule for Employee Non-Competes

Yesterday, the Pennsylvania Supreme Court granted allocator in Socko v. Mid-Atlantic Systems of CPA, Inc., 99 A.3d 928 (Pa. Super. Ct. 2014). Socko is the Pennsylvania Superior Court decision from May 2014 that re-affirmed the rule that fresh consideration is required for a non-compete signed after the inception of employment. In Socko, the employer tried to avoid the fresh consideration requirement by relying on Pennsylvania’s Uniform Written Obligations Act (“UWOA”). The UWOA provides that a written release or promise “shall not be invalid or unenforceable for lack of consideration, if the writing also contains an additional express statement . . . that the signer intends to be legally bound.”

The Superior Court called the issue one of “first impression in this Commonwealth,” but federal district courts interpreting Pennsylvania law had split on the issue of whether the UWOA applies in the non-compete context. On the merits, the Superior Court sided with the employee and held that the UWOA does not apply to restrictive covenants in the employment context, reasoning that non-compete covenants “are disfavored in Pennsylvania because they are in restraint of trade and may work significant hardships on employees agreeing to them.”

The Supreme Court’s decision in Socko will be of interest to business owners who use non-compete and to employees who are subject to non-competes. The subjects take on particular importance because in our experience the number of non-compete cases in litigation tends to rise with a growing economy.