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Consumer Protection & Privacy

FDCPA Class Certified in a Seemingly Individualized Dispute over Repayment Options Calculation

 by Maryia Y. Jones and David N. Anthony

In Alexander v. Coast Professional, Inc., No. 12-cv-1461, (E.D. Pa. Sept. 5, 2014), the United States District Court for the Eastern District of Pennsylvania certified a class of Pennsylvania residents with defaulted student loans serviced by Coast Professional [an enhanced version of this opinion is available to lexis.com subscribers]. The class action under the Fair Debt Collection Practices Act (FDCPA) is based on the allegations that Coast Professional failed to calculate defaulted borrowers’ repayment options by considering the totality of the borrowers’ financial circumstances as required by the Higher Education Act (HEA).

In 1992, Congress amended Section 428F of the HEA to enable students with defaulted federally-insured student loans to rehabilitate the loans by making a fixed number of consecutive monthly payments in an amount that was “reasonable and affordable,” based on the individual borrower’s “total financial circumstances.”  In after plaintiff defaulted on her loan, it was assigned to Coast Professional for collection, who contacted Plaintiff by telephone to discuss the loan and potential repayment options.

Despite being informed by plaintiff that her monthly expenses exceeded her monthly income, Coast Professional offered Alexander a monthly rehabilitation program consisting of monthly payments in the amount of $260 and advised her that this amount was the minimum amount that would be accepted. Pursuant to its policies and practices, Coast Professional calculated Alexander’s monthly payment based solely on a percentage of her outstanding balance and followed the same policies and procedures with regard to other student loan debtors. Alexander sued as a representative of a class of Pennsylvania debtors with defaulted student loans claiming unfair and unconscionable means to collect a debt in violation of the FDCPA.

The Court granted plaintiff’s motion for class certification finding that the issues of law and fact common to the class predominated over the individualized issues. Namely, defendant’s alleged misrepresentations regarding the borrowers’ repayment options without regard to the “total financial circumstances” of the borrowers were common to all class members and predominated over any individualized issues.

The Court’s decision is troubling and demonstrates that ostensibly fact-specific disputes involving individual borrower’s repayment options may not prevent class certification. As student loan servicers are coming under heightened scrutiny by regulators and the plaintiff’s bar, we will continue to monitor this case and others involving FDCPA and other claims.

 Read more at Consumer Financial Services Law Monitor by Troutman Sanders LLP.

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