District Court rules student loan servicer must turn over Department of Education borrower records to Bureau

Courts Student Lending CFPB Department of Education

On August 10, the U.S. District Court for the Middle District of Pennsylvania ordered a loan servicer hired by the Department of Education (Department) to service loans it owns to turn over certain Department-owned student loan borrower documents to the CFPB, which relate to the servicer’s collection and management of its federal student loan borrowers’ payments. During the course of the ongoing litigation (see previous InfoBytes coverage here), the servicer withheld the documents in discovery on the grounds that they belonged to the Department and were therefore protected from disclosure by the Privacy Act. Moreover, the servicer asserted that the dispute was really between the Bureau and the Department because, in order to turn over the documents, the servicer would first have to obtain permission from the Department.

However, according to the opinion issued by the court, turning over the documents would not violate the defendants’ agreement with the Department or violate federal privacy law. Specifically, the court stated that “there is no dispute that the borrower documents at issue are in the possession of [d]efendants, even if, as [d]efendants assert, they are owned by the Department,” and as such, under the Federal Rules of Civil Procedure, “requests can be made for production of documents, electronically stored information, and things in ‘the responding party’s possession, custody or control.’” Furthermore, the court stated that “the Privacy Act’s general prohibition on disclosure of records . . . does not create a qualified discovery privilege” and cannot be used as a means to “block the normal course of court proceedings, including court-ordered discovery.”