In 2015, Sierra Roach sued Navient Solutions, Inc. for violations of the Telephone Consumer Protection Act and the Fair Credit Reporting Act. Navient had been pursuing Roach to collect on five student loans totaling almost $69,000--money that had been disbursed to Bowie State University, not Roach.
Roach disputed the debt and claimed she was being repeatedly called by debt collectors. She also claimed that credit reporting bureaus were issuing inaccurate credit reports about her.
Navient filed a motion asking a federal court to stay Roach's suit and compel her to arbitrate pursuant to an arbitration clause that was buried in the promissory notes she allegedly signed. (Roach claimed not to remember signing the notes.)
Roach's defense to Navient's arbitration demand was that she had signed the promissory note with another entity, not Navient. But Navient presented evidence showing it had power to collect the debt, and a federal court granted Navient's arbitration demand in an order issued last December.
Roach had some other claims against Navient, but she apparently submitted them late and inartfully. After all, she had sued Navient without an attorney and was unfamiliar with the niceties of practicing law.
Some judges deal leniently with people who go to court without lawyers, but not Roach's judge. She had filed a "surreply memorandum," which the judge refused to consider, saying "sureplies are highly disfavored."
Although it is not entirely clear, she also apparently argued that the arbitration clause buried in the promissory notes had not come to her attention and that she did not realize that she had waived her right to sue when she signed the promissory notes.
The judge did not like this argument at all. In a footnote, he cited language from another decision that said: "[T]he fact that [plaintiff] may have chosen not not to access or read the language of the Arbitration Agreement does not render it invalid or non-binding."
In short, the judge forced Roach to arbitrate her claims against Navient.
Scholars and commentators largely agree that arbitration generally favors corporate parties. That's why banks, financial institutions, and student-loan lenders force people to sign arbitration clauses in routine documents. Like Ms. Roach, most people do not understand that they are signing away their right to sue for wrongdoing when they agree to arbitrate.
Two comments on the Roach case:
1) Many student-loan debtors are losing in the courts because they are not represented by competent lawyers. Roach's best argument for invalidating the arbitration clause was that it is an "adhesion contract" that she was forced to sign as a condition for getting federal loan money. Courts have ruled for fifty years or more that agreements waiving the right to sue can be nullified if the party signing the waiver is the weaker party with no opportunity to negotiate and no choice but to sign in order to receive a service. But Ms.Roach probably knew nothing about adhesion contracts.
Distressed student-loan debtors ought to have access to pro bono (free) legal services. There are literally hundreds of thousands of unemployed lawyers right now--and most of them have massive student-loan debt themselves. Their talents should be harnessed to help people like Ms. Roach.
2) The fact that student-loan lenders and for-profit colleges are allowed to put arbitration clauses in student-loan documents and college-enrollment forms is a scandal. Secretary of Education John B. King announced recently that he opposes this practice and will draft regulations that will put some limits on it.
But the regulation revision will go through a negotiations process, and any regulations DOE adopts are likely to be watered down. After all, the finance industry and the for-profit colleges have powerful lobbyists and sharp lawyers, and they make campaign contributions to powerful politicians.
For now at least, millions of people are jeopardizing their financial futures when they borrow money to attend college. Even if they are defrauded or get substandard educational experiences, they are barred from filing suit. And if they file for bankruptcy to get a fresh start, the creditors' attorneys are waiting for them to make sure these distressed debtors get booted out of bankruptcy court.
Roach v. Navient Solutions, Inc., 2015 WL 8479195 (D. Maryland, Dec. 10, 2015).
U.S. Department of Education. U.S. Department of Education Takes Further Steps to Protect Students from Predatory Higher Education Institutions. March 11, 2016. Accessible at http://www.ed.gov/news/press-releases/us-department-education-takes-further-steps-protect-students-predatory-higher-education-institutions?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm_term=