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Nelson v. Great Lakes Educational Loan Services, Inc.

United States District Court, S.D. Illinois

December 19, 2017

NICOLE DENISE NELSON, individually and on behalf of all others similarly situated, Plaintiff,
v.
GREAT LAKES EDUCATIONAL LOAN SERVICES, INC., and DOES, 1-10, Defendants.

          MEMORANDUM AND ORDER

          NANCY J. ROSENSTENGEL, UNITED STATES DISTRICT JUDGE.

         This matter comes before the Court on the Motion to Strike and to Dismiss Plaintiff's First Amended Class Action Complaint filed by Defendant Great Lakes Educational Loan Services, Inc. (“Great Lakes”) (Doc. 29). For the reasons set forth below, the motion is granted.

         Background

         Plaintiff Nicole Nelson is an Illinois resident who began repaying her student loans on December 14, 2009 (Doc. 24, ¶¶ 1, 79). Defendant Great Lakes is Nelson's student loan servicer (Id. at ¶ 149). As a loan servicer, Great Lakes is responsible for managing borrowers' accounts, processing payments, assisting borrowers, and communicating with borrowers about the repayment of their loans (Id. at ¶ 1).

         Federal student loan borrowers have a number of repayment plans available to them. Nelson alleges that federal student loan borrowers who are unable to afford their current payment can change to another repayment plan at any time, including an “income-driven” repayment plan. These income-driven plans set the borrower's monthly student loan payment at only a percentage of his or her “discretionary” income (Id. at ¶ 16). Income-driven repayment plans can offer borrowers extended payment relief, as well as other benefits such as a $0 monthly payment that still counts as a qualifying payment toward loan forgiveness (Id. at ¶ 18-19).

         The United States Department of Education has advised borrowers to contact its student loan servicer before applying for any alternative repayment plan or forbearance (Id. at ¶ 32). Likewise, Great Lakes repeatedly encouraged borrowers experiencing financial hardship to contact it for assistance in evaluating the various alternative repayment options and not to contact others for student loan advice (Id. at 33). For example, Great Lakes' website states: “You don't have to pay for student loan services or advice. Our expert representatives have access to your latest student loan information and understand all of your options.” (Id. at ¶ 34). Nevertheless, Nelson claims, despite attempting to publicly assure borrowers that Great Lakes will help them enroll in an appropriate, affordable repayment plan, it systematically and routinely disregarded that commitment and used its “expert” call center employees to steer student loan borrowers experiencing long-term financial distress or hardship into forbearance and deferment. Nelson claims this practice delayed borrowers' entry into alternative or income-driven repayment plans.

         Nelson asserts that Great Lakes took these actions to save money in two ways. First, it had to pay fewer employees to be on the phone with student loan borrowers processing a forbearance or deferment than it would if employees had to explain enrollment in income-driven repayment options, as those options take significantly longer to explore (Id. at ¶ 51, 70). Likewise, Great Lakes would have to pay more employees to review and process income-driven repayment plan applications and yearly renewals, thereby increasing operating costs (Id. at ¶¶ 51, 72). Nelson further avers that Great Lakes incentivized its employees to push borrowers into forbearance without exploring income-driven repayment plans (Id. at ¶ 52). Specifically, Great Lakes tracked, evaluated, and compensated its customer service personnel, in part, based on average call time (Id. at ¶ 53). The shorter the call, the more compensation employees received (Id.).

         In the process of paying her own student loans, Nelson experienced financial hardship and called Great Lakes on multiple occasions to obtain information regarding repayment options (Id. at ¶¶ 79-87). Each time, Nelson was routed to a call center employee who, she alleges, followed a script that was designed to steer her into forbearance (Id. at ¶ 93). As a result, Nelson was enrolled in forbearance four times by Great Lakes' “expert” call center employees who led her to believe that was her best option (Id. at ¶¶ 92, 96, 99). She also entered unemployment deferment once as a result of her call to Great Lakes. Nelson claims Great Lakes' “expert” employees did not inform her of other alternative repayment options that likely would have allowed her to make much lower monthly payments (Id. at ¶ 109).

         On May 15, 2017, Nelson filed the First Amended Class Action Complaint, alleging Great Lakes and certain John Does deceptively and systematically deterred her from obtaining access to income-driven repayment plans and instead steered her and other student loan borrowers into forbearance (Id. at ¶¶ 6, 130(g)). Nelson alleges Great Lakes and the John Doe Defendants engaged in “numerous unfair acts and practices, ” including holding themselves out to be experts, recommending forbearance to borrowers, and failing to inform borrowers of all options-all in an effort to save Great Lakes significant amounts of money (Id. at ¶¶ 51, 130). Nelson claims she relied upon the information provided by Great Lakes, which caused her to go into forbearance rather than enter a repayment plan better suited for her circumstances (Id. at ¶¶ 135-36, 139).

         Nelson seeks to represent two classes of persons made up of student loan borrowers who have been similarly placed in forbearance without being adequately informed of alternative repayment options (Id. at ¶ 113). Specifically, Nelson has identified these two classes as:

Illinois Consumer Fraud Class

         All individuals who reside in Illinois or who entered into student loan contracts in Illinois, who since February 21, 2014, were subjected to Defendants' unfair and deceptive conduct, as further described in Count I, and were placed in forbearance without being advised of alternate repayment options.

Illinois Constructive Fraud Class
All individuals who reside in Illinois or who entered into student loan contracts in Illinois, who since February 21, 2012, were subjected to Defendants' unfair, misleading, and/or deceptive conduct, as further described in Count II, who were placed in forbearance without being advised of alternate repayment options.

         Nelson, individually and on behalf of the class mentioned above, asserts two claims under Illinois law.[1] In Count I, she alleges a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act on behalf of the Illinois Consumer Fraud Class. In Count II, Nelson alleges constructive fraud on behalf of the Illinois Constructive Fraud Class. Nelson ...


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