State attorney general targets student loans, other consumer protections

If you think you are seeing the state take more businesses to court than in the past, you’re right, according to Washington state Attorney General Bob Ferguson.

There was just one consumer protection trial in the 17 years before he took office, he told the Herald editorial board Tuesday during a visit to the Tri-Cities.

He’s also bringing nearly twice as many cases forward as two years ago, he said.

“The reason for that is not because there are more bad actors out there — I think that is relatively constant. We simply have put more resources in it,” he said.

When he was elected attorney general, the office had eight attorneys devoted to consumer protection. That’s grown to 22, with two more being hired, he said.

The increase has come despite a dramatic drop in recent years in funding for consumer protection from the state’s general fund.

Ferguson’s first priority is to recover money for consumers who have been harmed.

Additional money from settlements or court cases won go into the state general fund, and in some cases are reinvested in the consumer protection program to grow the program and pay the costs of bringing cases, he said.

The litigation comes at a risk. Under Washington law, the state pays the cost of the winning side if the state loses its consumer protection lawsuit, Ferguson said.

But if the state does not sue, it sends a message to businesses that the Attorney General’s Office will always settle, which means less money for the state.

“If you go to trial and start winning, people get the memo on that,” Ferguson said.

Last month, after a three-week trial, a King County judge awarded the state nearly $4.3 million in penalties, attorneys’ fees and costs for multiple violations of the state Consumer Protection Act by the makers of 5-Hour Energy.

The judge found the company made deceptive claims, including that doctors recommend 5-Hour Energy.

Now Ferguson is taking on Navient Corp., an offshoot of education-finance giant Sallie Mae, as part of work to protect students who take out loans for their education.

The lawsuit against Navient alleges that it has used deceptive practices, such as overstating the amount due when borrowers fall behind on payments.

It has enticed family members to co-sign loans, saying they will be released when the student has demonstrated an ability to pay. But then it applies requirements in ways students could not have foreseen, according to the attorney general.

For instance, if a student makes a loan payment a month early, Navient counts it as a skipped payment the next month when calculating whether the student has demonstrated an ability to pay, Ferguson said.

To help students, the Office of the Attorney General has published a “Student Loan Survival Guide: Navigating Student Debt from Start to Finish,” with information ranging from choosing a school to what to do if repayment is a problem. It is at bit.ly/studentloanadvice.

He also has two proposed laws under consideration in the 2017 legislative session to help students with loans.

One would require that colleges give students their loan balance and estimated monthly payments at least annually.

When Indiana University sent annual loan statements to students, along with instituting other financial literacy programs, undergraduate borrowing dropped by about 15 percent over two years, according to Ferguson.

The second bill would establish a student loan ombudsman to receive and resolve complaints and provide education to student borrowers. Standards would be set to make sure companies handling student loans are held accountable.

More than half the students graduating from Washington’s colleges and universities in 2014 had student loans, with the average debt at $24,000.

This story was originally published March 21, 2017 at 7:54 PM with the headline "State attorney general targets student loans, other consumer protections."