On January 11, Massachusetts Attorney General (AG) Andrea Joy Campbell announced a $1.8 million settlement with Nelnet, Inc. (Nelnet), one of the largest federal student loan servicers in the U.S., for allegedly sending written notices to borrowers about renewing income-driven repayment (IDR) plans that failed to meet certain regulatory requirements and, in some cases, failing to send the required notices altogether.
IDR plans generally set a borrower’s monthly payment amount based on the borrower’s level of income, with any remaining loan balance forgiven after a certain number of years of payments. Some IDR plans also offer valuable interest subsidies. Student loan servicers like Nelnet are legally required to help borrowers avail themselves of the benefits available under IDR plans by helping borrowers navigate the required enrollment and annual recertification processes, which includes submitting documentation to verify income and family size. Borrowers are also required to recertify each year in order to maintain eligibility for the IDR plan. Under federal law, Nelnet is required to, among other things, provide borrowers with at least 60 days’ notice of their deadline to recertify and explain the consequences for failing to do so (including the estimated increase in the monthly payment). Following an investigation into its notification practices, the Massachusetts AG’s office concluded that Nelnet failed to comply with these regulations between 2013 and 2017 in violation of the Commonwealth’s Consumer Protection Law.
Under the terms of the settlement, Nelnet is required to pay $1.8 million to the AG’s office, $1 million of which will be applied to the Commonwealth’s General Fund, and $800,000 will go to the Student Loan Trust Fund. Nelnet also agreed to certain business practice changes for any loans to borrowers in Massachusetts, including complying with all notice requirements and retaining copies of each written communication regarding IDR plans for the next three years.
Student debt relief and loan servicing reform were points of focus under former Massachusetts AG Maura Healey and, in announcing this latest settlement, AG Campbell signaled that these issues will continue to be a priority for her office. More broadly, this settlement is consistent with state AGs’ oversight of lending practices in their jurisdictions, and the use of consumer protection laws to bring enforcement actions against lenders who fail to fulfill their notification and information obligations to borrowers. Loan servicers should remain vigilant of current compliance practices with respect to notice obligations in light of heightened scrutiny at both the state and federal level.
Troutman Pepper State Attorneys General Team
|Ashley Taylor – Co-leader and Firm Vice Chair
Ashley is co-leader of the firm’s nationally ranked State Attorneys General practice, vice chair of the firm, and a partner in its Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He helps his clients navigate the complexities involved with multistate attorneys general investigations and enforcement actions, federal agency actions, and accompanying litigation.
|Clay Friedman – Co-leader
Clayton is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice, multidisciplinary teams with decades of experience crafting effective strategies to help deter or mitigate the risk of enforcement actions and litigation.
Judy is a partner in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice, based in the Richmond office. She brings experience serving as chair and commissioner of the Virginia State Corporate Commission (VSCC) from 2006 through 2022, which includes regulating the utilities, insurance, banking, and securities industries. She also served as Virginia’s attorney general from 2005-2006.
Stephen leads the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He focuses his practice on enforcement actions, investigations, and litigation. Stephen primarily represents clients engaging with, or being investigated by, state attorneys general and other state or local governmental enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, with a particular focus on heavily regulated industries.
A former deputy attorney general of New York, Avi applies his experience in bet-the-company matters, representing clients in criminal and civil investigations and enforcement actions before state and federal regulators, prosecutors and enforcement agencies.
Michael is a partner in the firm’s State Attorneys General and Regulatory Investigations, Strategy + Enforcement (RISE) Practice Groups, nationwide teams that advise clients on consumer protection enforcement matters and other regulatory issues.
|Samuel E. “Gene” Fishel
Gene is a member of the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) practice, based in the Richmond office. He brings extensive regulatory experience, having most recently served as senior assistant attorney general and chief of the Computer Crime Section in the Office of the Attorney General of Virginia, and as special assistant U.S. attorney in the Eastern District of Virginia for 20 years.
Tim is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, where he represents corporations and individuals facing potential civil and criminal exposure. Tim’s experience in government investigations, enforcement actions, and white-collar litigation spans a number of industries, including financial services, pharmaceutical, health care, and government contracting, among others.
Chris Carlson represents clients in regulatory, civil and criminal investigations and litigation. In his practice, Chris regularly employs his prior regulatory experience to benefit clients who are interacting with and being investigated by state attorneys general.
Natalia is an associate in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice. She focuses her practice on two primary areas: government contracting and state attorney general work.
Namrata (Nam) is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. She routinely advises clients on a wide variety of state and federal regulatory matters, with a particular emphasis on state consumer protection laws relating to consumer financial services and marketing and advertising.
Michael is an associate in the firm’s Regulatory Investigations, Strategy, and Enforcement Practice Group. Based out of the firm’s Boston office, Mike has deep experience in litigation, investigations, and other regulatory matters involving state-level regulators and state attorneys general.
Susan is an associate in the firm’s Consumer Financial Services Practice Group, and focuses her practice on consumer financial services matters. She has defended several of the nation’s largest and most influential financial institutions in individual and class action litigation involving the Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and other consumer privacy statutes.
John is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He focuses his practice on a wide range of general and complex litigation matters, including shareholder disputes, fraud, products liability, breach of contract, and Biometric Information Privacy Act claims.
Whitney is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. She represents clients facing state and federal regulatory investigations and enforcement actions, as well as related civil litigation.
Trey is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice. He focuses his practice on helping financial institutions and consumer facing companies navigate regulatory investigations and resulting litigation.
Daniel is a member of the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and State Attorneys General team. He counsels clients in connection with navigating complex government investigations, regulatory compliance, and transactions, involving state and federal government contracting obligations. Drawing on his broad experience as a former assistant attorney general for the state of Illinois, Daniel is a problem solver both inside and outside the courtroom.
Stephanie is Troutman Pepper’s senior government relations manager in the state attorneys general department.