On September 20, 2021, the Department of Justice (DOJ) announced that it reached a settlement with the New Jersey Higher Education Student Assistance Authority (HESAA), resolving allegations that the state agency unlawfully obtained default judgments against two military servicemembers for student loan debt in violation of the Servicemembers Civil Relief Act (SCRA).
In a complaint filed the same day as the proposed consent order in the U.S. District Court for the District of New Jersey, the DOJ alleged that HESAA sought default judgments against two servicemembers without notifying the court of their military status. SCRA requires lenders to provide courts with such notification upon seeking default judgment of servicemembers as a safeguard in case the servicemembers are unable to appear in court and defend themselves due to their military service. Once on notice, a court may not enter judgment against a servicemember until it appoints an attorney to represent the borrower. Rather than informing the court of these two borrowers’ military status, the DOJ alleged that HESAA filed false affidavits stating that the borrowers were not in military service.
Under the proposed consent order, HESAA must pay restitution in the amount of $15,000 to each for the two servicemembers who had default judgments entered against them and a $20,000 civil money penalty to the United States. HESAA also must provide SCRA training to its employees and outside counsel and develop new policies and procedures consistent with SCRA.
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