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Student Borrowers Deserve Day in Court

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Tuesday, April 09, 2013

It’s off with the mortarboard and straight into depression as people come out of college and graduate school loaded with debt, often unable to buy cars or houses for years. Even worse, they’re finding themselves locked in by clauses requiring them to go into arbitration instead of suing in court if they have a complaint against the lender, and/or prohibiting them from joining others in class action suits against the lender. Improper practices might include bait-and-switch; failure to credit payments made, or to grant extensions in cases where extensions are required by the terms of the loan agreement; or throwing loans into default when they don’t meet the criteria for default.

In every area of economic life, arbitration clauses have replaced the right to a day in court. You start a new job; you take out a credit card; you sign a lease. The fine print on your contract tells you that if you run into trouble with the party that issued it, you can’t sue; instead, you’re stuck with mandatory arbitration.And arbitrators are usually chosen by businesses, not consumers. The clauses are particularly onerous in the case of student loans because the amount at stake is so large, and because student loans, unlike other types of loans, can’t be discharged in bankruptcy.

The consumer advocacy group Public Citizen is leading a fight to get the federal Consumer Financial Protection Bureau to force lenders to quit writing arbitration clauses and class action bans into student loans. If you are a borrower who has suffered from a bad lending practice and could not seek redress in court because of an arbitration clause or a provision banning you from joining with others to sue, Public Citizen wants to hear your story and pass it on to the CFPB (visit http://action.citizen.org/p/dia/action/public/?action_KEY=12155).•

 

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