Cease and desist sent to student loan company MOHELA in relief trial

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  • Advocacy groups AFT and SBPC sent a cease and desist letter to student loan company MOHELA.
  • They said the company’s involvement in a relief lawsuit violates consumer protections.
  • Specifically in California, the groups say the company violates the state’s Borrowers’ Bill of Rights.

Defenders are not letting a student loan company embroiled in an easy debt relief lawsuit.

On Tuesday, advocacy groups the American Federation of Teachers (AFT) and the Student Borrower Protection Center (SBPC) sent a cease and desist to student loan company MOHELA which accused it of “interfering with student borrowers’ right to loan forgiveness” which President Joe Biden announced in late August, according to the letter.

In late September, six Republican-led states filed a lawsuit against Biden up to $20,000 in debt relief under the argument that it would harm the tax revenues of their states, as well as the MOHELA business operations, which is hosted in Missouri where the lawsuit was filed. A federal judge is scheduled to hear oral arguments on Wednesday on whether the relief should be stayed. The Biden administration already made his defense as to why the conservative lawsuit is worthless, and the lawyers want to make sure that MOHELA does not further harm borrowers during this process.

Student loan giant MOHELA has grown on federal contracts and backroom deals with big banks. Now its executives think they’re above the law and are using the courts to squeeze their profits above interests of student borrowers,” said the executive director of SBPC. Mike Pierce said in a statement.

The groups also noted that MOHELA’s actions could constitute “potential liability” under the California Student Borrower Bill of Rights and the Consumer Financial Protection Act. Specifically, California has a bill of rights for student loan borrowers in the state that prohibits student loan companies from engaging in certain practices that could harm borrowers, and companies that violate this prohibition could face a lawsuit on behalf of all affected borrowers that could leave him liable for more than $175 billion in damages.

The cease and desist letter stated that seeking to block debt relief and understaffed call centers might constitute such behavior.

“Our investigation revealed that MOHELA was understaffed in its call centers: borrowers report waiting times of several hours with no response and receive busy signals from the telephone line or a message that the number does not exist “, says the letter. “Borrowers with critical questions about student debt relief, such as how to apply, consolidate their loans, or otherwise, cannot receive the information they are legally entitled to receive from their loan officer. service.”

If the lawsuit progresses, the AFT and SBPC estimate the cost of injuries to borrowers in California would be more than $55 billion.

MOHELA could not immediately be reached for comment, but the Republican lawsuit on behalf of the company – which also runs the Public Service Loan Forgiveness Program (PSLF) – noted that when borrower balances fall to zero, that suffer a loss of income servicing these loans.

The Biden administration said in his legal defense that the case is worthless, but the lawyers want to make sure that, whether it prevails or not, the borrowers remain unscathed.

“MOHELA’s scheme is not just a betrayal of the trust he owes millions of student borrowers, it is part of a larger pattern of illegal behavior and must stop now,” said Randi Weingarten, president of the AFT, in a press release. “People in debt in California and across the country deserve life-changing debt relief, and we won’t let a rogue student loan company get in the way.”

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