New Jersey HESAA SCRA Case: Judgments Despite DMDC Records, DOJ Says

What happened

On September 20, 2021 the United States sued the New Jersey Higher Education Student Assistance Authority (HESAA) in the District of New Jersey and filed a proposed consent order the same day; the court entered it on October 21, 2021. The complaint describes HESAA as a public corporation in the Executive Branch of New Jersey's state government and an instrumentality of the State, and the order adds that its statutory task is furthering access to postsecondary education. The order covered its New Jersey College Loans to Assist State Students (NJCLASS) loans and any other loans it originated or serviced (complaint paragraph 1; consent order paragraphs 2 to 4).

The first servicemember is a Coast Guard petty officer who, the complaint says, volunteered on September 12, 2001, enlisted on September 25, 2001 and, as of the 2021 complaint, had served on active duty ever since and was stationed on the Coast Guard Cutter Hammerhead in Cape May, New Jersey. In 2004 and 2005 he co-signed his then-girlfriend's HESAA student loans. On February 20, 2019 HESAA moved for a default judgment against him in the Superior Court of New Jersey, Law Division, Ocean County, telling the court in a sworn affidavit that he was not on active duty. On February 22 it wrote to him that judgment had been entered and warned of wage garnishment. On March 8 it sent an information subpoena for a judgment of $8,982.36 plus costs and interest, warning that failure to comply could result in his arrest and incarceration (complaint paragraphs 8 to 12).

The second was on active duty in the Navy. On April 15, 2016 HESAA moved for a default judgment against him in Essex County, again swearing he was not on active duty, and sought $3,670.17 owed on the loan, $438.27 in attorney's fees and $16.00 in filing fees; he paid the amount owed, plus other fees and costs, to settle that action (paragraph 13). The complaint says HESAA ran Defense Manpower Data Center searches on the two men on or about April 15, 2016 and February 20, 2019, and both certificates showed active duty (paragraph 15).

HESAA neither admitted nor denied the allegations. The order notes that the United States did not claim the violations were intentional and that HESAA attributes the judgments to human error contrary to its own policies. A footnote reports that a review found the two SCRA-protected servicemembers among approximately 6,000 people HESAA obtained default judgments against from January 1, 2014 to April 9, 2019, and that HESAA's records tie one case to a loan placed with outside collection counsel before the borrower entered active service (consent order paragraphs 8 and 9 and footnote 1). DOJ's release says Coast Guard legal assistance attorneys in Portsmouth, Virginia reported the 2019 judgment.

The law behind this: 50 U.S.C. § 3931

Protection of servicemembers against default judgments: read the statute , or read § 3931 in plain English, with its enforcement record .

This settlement clearly sends the message that the Department of Justice will continue enforcing the Act vigorously to protect servicemembers and to ensure that all covered industries, including providers of student loans, comply fully with the law.

Through this settlement, we honor the brave members of our armed services by ensuring that their rights are protected when called to duty.

Who was covered

The two servicemembers named in the order, in each of whose cases HESAA erroneously filed an affidavit telling the court he was not in military service (consent order paragraph 22). If HESAA later found other default judgments against servicemembers that did not comply with the SCRA, it had to notify the United States, pay each servicemember $15,000, seek to vacate the judgment and remove the related credit report entries (paragraphs 29 and 31). Its terms also bound HESAA's successors and those acting in concert with it, including for loans they acquired from January 1, 2014 to its effective date (paragraph 37).

What the settlement paid

• $15,000 to each of the two servicemembers, delivered by counsel for the United States once each signed a release (consent order paragraphs 23 to 27). DOJ's release describes the settlement as $50,000 including the civil penalty.
• HESAA could not reduce the payments to offset debts the two allegedly owed, and nothing in the order kept it from seeking to recoup the payments from the outside counsel involved in the two lawsuits (paragraph 28).
• The order records that HESAA had already taken the steps needed to have the two judgments vacated, where applicable, and the credit report entries reflecting them removed (paragraph 31).
• A civil penalty of $20,000, payable within 30 days (paragraph 33), no fewer than two annual SCRA trainings during the order's term for employees and outside collections counsel, with an April 14, 2021 session for outside counsel counted as the first (paragraph 16), and an 18-month term from entry (paragraph 44).

Why this case matters

The database had the right answer and the affidavits did not. By the complaint's account, HESAA's own DMDC certificates showed both men on active duty around the same dates its affidavits swore they were not. Under Section 3931(b)(2), once it appears that the defendant is serving, the court may not enter judgment until it appoints an attorney for him, which is the protection these affidavits took away. The order required the affidavit to be executed within two business days ahead of the default motion, with the most recent DMDC Status Report attached, and a separate DMDC search under each last name variant or alias HESAA knew of (consent order paragraph 12).