DOJ enters into consent order with NJ student lending authority to settle claim of alleged SCRA violations

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The Department of Justice announced earlier this week that it has entered into a consent order with the New Jersey Higher Education Student Assistance Authority (HESAA) to settle the DOJ’s claim that HESAA violated the Servicemembers Civil Relief Act (SCRA) by obtaining unlawful court judgments against two military servicemembers for amounts owed on student loans.  The settlement requires HSEAA to pay $15,000 each to the two servicemembers who had default judgments entered against them, and a civil penalty of $20,000 to the United States.  It also requires HESAA to provide SCRA training to its employees and outside counsel and develop new policies and procedures consistent with the SCRA.

The SCRA requires a plaintiff in a civil proceeding that seeks a default judgment to file an affidavit with the court stating whether or not the defendant is in military service and showing facts necessary to support the affidavit or, if the plaintiff cannot determine the defendant’s military status, stating that the plaintiff is unable to determine whether the defendant is in military service.  If the plaintiff informs the court that the defendant is in military service, the court cannot enter a judgment until it appoints an attorney to represent the defendant and, in certain circumstances, must postpone the proceedings for at least 90 days.

In its complaint filed in New Jersey federal district court, the DOJ alleged that HESAA obtained default judgments against two SCRA-protected servicemembers after filing affidavits stating that the defendants were not in military service despite having knowledge that they were on active duty at the time the default judgments were sought.  HESAA had allegedly conducted searches of the Defense Manpower Data Center (DMDC) database, which generated certificates indicating that both servicemembers were on active duty.  The DOJ alleged that HSEAA’s written policy regarding servicemember borrowers lacked sufficient procedures designed to ensure that military status was accurately reported to the court.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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