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Consumer Class Action

Bible v. United Student Aid
Funds, Inc.

In Bible v. United Student Aid Funds, Inc., 799 F.3d 633 (7th Cir. 2015), our attorneys successfully argued that students, who enter into repayment agreements to repay their outstanding student debt, may bring legal action against their student loan guarantors for breach of contract and related claims, when their loan guarantor wrongly charged them collection fees in violation of the regulations to the Higher Education Act, and by extension their underlying note.

Bryana Bible defaulted on her student loans in 2012 and promptly agreed to enter into a rehabilitation agreement and repayment plan. Ms. Bible timely made these payments; nonetheless, her loan company still assessed her with a $4,500 in collection fee. Her underlying promissory note permitted the company to assess reasonable collection costs as permitted by the Higher Education Act. The regulations to the Higher Education Act, however, did not permit the imposition of collection fees against a borrower who was actively repaying.

Nichols Kaster brought a claim on behalf of Ms. Bible and similarly situated persons alleging breach of contract and claims under the Racketeer Influenced and Corrupt Organizations Act. The loan company moved to dismiss Ms. Bible’s claims and the district court granted the request. Nichols Kaster appealed.

Appellate Ruling

The Seventh Circuit Court of Appeals reversed the ruling, siding with Ms. Bible. The court first found that Ms. Bible’s breach of contract claims were actionable because the promissory note in question incorporated by reference the Higher Education Act and supporting regulations which prohibit the assessment of collection costs against first-time defaulters who promptly agree to repay their loans. The court further held that Higher Education Act did not preempt either of Ms. Bible’s causes of action.

This was a groundbreaking victory for student loan borrowers everywhere.

“Student loan borrowers, just like any other party to a contract, should be allowed to enforce the terms of those contracts in court. The Seventh Circuit spoke with a clear and unified voice in affirming this basic principle. The decision is also tremendously important given how long student loan borrowers carry substantial debt. That debt cannot—under contract or the Higher Education Act—be increased by the addition of collection costs for borrowers like Ms. Bible who timely agreed to repay their loans.”

- Anna Prakash, Attorney

Nichols Kaster’s Results

The parties reached a class-wide settlement for a total of $23,000,000 on June 16, 2017, and the Court approved the settlement.

Settlement Amount

Past results are reported to provide an indication of the type of litigation in which we practice and should not be construed to create an expectation in any other case as all cases are dependent upon their own unique fact situation and applicable law. Any result we might have achieved on behalf of one client does not necessarily indicate similar results can be obtained for other clients.

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