Great Lakes, Equifax, TransUnion, and Experian Sued for Damaging Millions of Student Loan Borrowers’ Credit, Mishandling Pandemic Relief

Student Loan Giant, Consumer Reporting Agencies Broke Laws that Prohibit Reporting of Inaccurate Credit Information and Failed to Follow the CARES Act

May 20, 2020 | SAN FRANCISCO, CALIFORNIA — Today, individuals representing a class of millions of student loan borrowers sued five of the nation’s largest financial companies for illegally damaging borrowers’ credit and mishandling CARES Act pandemic relief. This lawsuit, Sass et al. v. Great Lakes et. al., was filed against Great Lakes Education Loan Services Inc., a subsidiary of student loan company Nelnet Corporation (NYSE: NNI), along with national consumer reporting agencies Equifax (NYSE: EFX), TransUnion (NYSE: TRU), Experian (LON: EXPN), and the consumer reporting agencies’ jointly owned subsidiary Vantage Score Solutions, LLC. The plaintiffs are represented by Towards Justice, a non-profit economic justice law firm, and Berger Montague, with support from the Student Borrower Protection Center.

In March, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which suspended borrowers’ payment obligations and waived interest charges for most federal student loan borrowers, including millions of Great Lakes’ customers. Today’s lawsuit alleges that Great Lakes, which services the loans of more than 8 million federal student loan borrowers, mishandled the implementation of this relief by illegally providing inaccurate information about millions of its customers to Equifax, TransUnion, and Experian, each of which in turn illegally reported this information to third parties. Further, each of these companies, in their capacities as the joint owners of VantageScore Solutions, LLC, which was also named in the complaint, treated this inaccurate information as derogatory and sold borrowers’ improperly damaged credit scores to third parties.

The complaint, Sass et al. v. Great Lakes et al., is available here: https://protectborrowers.org/wp-content/uploads/2020/05/sass_v_great_lakes-1.pdf.

“During a national pandemic, these companies illegally damaged the credit of millions of people,” said SBPC Executive Director Seth Frotman. “For too long, the student loan system has crushed borrowers when they slip up, while industry has received a free pass when it harms millions. Borrowers deserve justice.”

“Student loan borrowers should have been able to breathe a sigh of relief that their payment obligations were automatically suspended by the CARES Act,” said Berger Montague Attorney E. Michelle Drake. “Instead, they panicked as they saw their credit scores plummet. Defendants’ business-as-usual approach to credit reporting in the wake of the CARES Act is inexcusable. Congress cared enough to change the law and spend billions of dollars. Defendants should have cared enough to change a couple lines of computer code.”

“These companies have admitted they made a mistake harming millions of student loan borrowers,” said Towards Justice Director David Seligman. “They say they’ll fix it soon, but for many the damage has been done, and the millions of Americans crushed by unforgiving student loan debt know too well that large financial institutions like the defendants here rarely allow borrowers the kind of lenience they seem to be expecting from the American public now.”

Plaintiff Cody Hounanian, the Program Director at the nonprofit  Student Debt Crisis, discovered that his credit score had suddenly declined as he was shopping for a mortgage to purchase a new home. Through no fault of his own, Great Lakes inaccurately reported that his federal student loans had been “deferred” and this bad information then appeared on his credit reports and caused his credit score to plummet. As a result of his damaged credit, Mr. Hounanian chose to abandon his home search for the remainder of the pandemic and instead will have to move into his parents’ house and place his belongings in storage. Today’s lawsuit alleges that illegal practices by the companies named in the suit resulted in a measurable, immediate financial loss to Mr. Hounanian.

“After years of fighting to protect student loan borrowers from industry abuse, I now find myself a victim of illegal business practices by companies across the financial services industry,” said plaintiff Cody Hounanian. “These actions have not only harmed my ability to purchase a home, but it has also limited my financial opportunities in the midst of historic health and economic crisis. Today, I am continuing to fight to protect borrowers – not as an advocate – but as a plaintiff in this important case.”

The CARES Act suspends student loan payment obligations through September 30, 2020. During that time, borrowers’ credit reports are supposed to reflect the loans as if there was “a regularly scheduled payment made by a borrower.” This requirement is also reflected on Experian’s own website, which explained in a blog post that “the Department of Education will report suspended payments to the national credit bureaus as though they were on-time payments.”

Despite requirements under the law, public complaints from borrowers like lead plaintiff Mr. Hounanian reveal widespread, improper furnishing and credit reporting. Specifically, borrowers whose loans are serviced by Great Lakes complain of their damaged credit caused by no fault of their own. Following borrower complaints, Great Lakes has publicly acknowledged its error.

Great Lakes is the government student loan contractor that handles loans for more than 8 million customers and is the largest servicer of borrowers with federally held loans. Today’s lawsuit demands Great Lakes immediately cease violating the California Consumer Reporting Agencies Act. Today’s lawsuit also demands Experian, TransUnion, Equifax and VantageScore Solutions LLC immediately cease violating the Fair Credit Reporting Act, the California Consumer Reporting Agencies Act, and California’s Unfair Competition Law.

Earlier this week, Maryand’s Office of the Commissioner of Financial Regulation issued an advisory to the student loan servicing and consumer reporting industries, warning of the risks posed to consumers by the illegal practices alleged in today’s lawsuit.

This lawsuit comes as industry and the Trump Administration face other allegations of misconduct related to the implementation of protections for student loan borrowers under the CARES Act.  Three weeks ago, the Student Borrower Protection Center, in partnership with National Consumer Law Center and Student Defense, brought a different lawsuit against Education Secretary Betsy DeVos for unlawfully garnishing wages of student loan borrowers in default, in violation of another provision of the CARES Act.

CONSUMER ALERT 

Federal student loan borrowers who have loans serviced by Great Lakes Education Loan Services, Inc. may have been impacted by this illegal credit reporting. This can negatively impact borrower’s access to and how much they pay for credit. Credit reports are also routinely used by employers, landlords and others as a measure of borrowers’ personal responsibility and damaged credit can cause borrowers to miss out on employment and housing opportunities.

Affected borrowers should:

1. Immediately download and save copies of each free credit report from annualcreditreport.com in order to preserve an accurate record of their current credit information.
2. If they have experienced a change in their credit on or after March 13, 2020 (the date of the start of the Covid19 national emergency) and believe it was due to incorrect information provided by Great Lakes, contact the Student Borrower Protection Center by completing this form: https://protectborrowers.org/credit/.

The Student Borrower Protection Center is a nonprofit organization focused on alleviating the burden of student debt for millions of Americans. SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.

Towards Justice is a nonprofit law firm that seeks to advance economic justice through impact litigation, strategic policy advocacy, and capacity building. We were founded in response to the high volume of wage theft complaints that were not being addressed in Colorado, but quickly broadened our scope to take on cases that dismantle the power imbalances that undermine the value of work and diminish worker rights.

Berger Montague is a national plaintiffs’ class action and complex litigation law firm headquartered in Philadelphia with offices in San Diego, Minneapolis, and Washington, D.C. Berger Montague litigates complex civil cases and class actions in federal and state courts throughout the United States. In its 50 years of operation, the Firm has pioneered the use of class actions in America and recovered well over $36 billion for its clients and the class members it has represented. 

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E. Michelle Drake

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