Partial Cert. Granted in Student Loan Late Fee Class Action

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A group of California debtors earned a partial victory after a judge certified two Classes in a student loan late fee class action lawsuit regarding the fees, although the same order denied two Classes regarding “usurious interest.”

According to the original student loan late fee class action lawsuit, Sallie Mae Inc. (SMI), now doing business as Navient Solutions, as well as related companies, engaged in improper student loan billing practices that violated California state law and affected thousands of borrowers. The major issue for U.S. District Court Magistrate Judge Elizabeth D. LaPorte is who actually holds the notes.

Based on California state law, the administrator of a debt, in this case SLM Corp., can still be held liable for the late fees because they are the ones actually issuing those charges. However, there are questions about who actually holds the loan notes themselves. As a result of that lack of clarity regarding corporate partners for usury, U.S. Magistrate Judge LaPorte felt uncomfortable certifying the excessive interest Class.

The judge agreed with the defendants that SLM and SMI “are neither the loan owners nor are they a recipient of the allegedly usurious loan interest.” She also referenced the defendants’ statements that SMI was only an administrating entity that turned over payments to trusts which then distributed them to various entities, one of which was SMI itself.

Due to the rapid motion of student loan notes, plaintiffs in the class action lawsuit faced a challenge in ascertaining who holds the current note. For example, although the lender was Stillwater National Bank in Oklahoma, at least was one defendant was simply a numbered trust.

Still, Judge LaPorte certified the following damages Class: “All persons who at any time obtained a Signature, CEC Signature or CEC Recourse loan where the lender identified on the loan application was Stillwater National Bank and whose loan application listed California as the permanent residence of the borrower if no temporary residence was identified, or whose loan application listed California as the temporary residence of the borrower, and who on or after March 17, 2007 paid a Late Charge incurred from Sallie Mae.”

The plaintiffs are represented by Joseph N. Kravec Jr. and Wyatt A. Lison of Feinstein Doyle Payne & Kravec LLC and by Janet Lindner Spielberg, Michael D. Braun and William J. Genego.

The Student Loan Late Fee Class Action Lawsuit is Tina M. Ubaldi, et al. v. SLM Corp., et al., Case No. 3:11-cv-01320, in the U.S. District Court for the Northern District of California.