April 14, 2013

Lawsuit over Michigan student loan program moves to federal court as borrowers seek class-action status

LANSING -- A pair of student loan borrowers who were being sued by the Michigan Finance Authority in connection to a now-defunct interest rate reduction program have filed a counter-claim in federal court.

Former Michigan State University students Hans Kiebler and Donovan Visser filed a class-action counter-claim against the authority, alleging that the termination of the "Michigan Students First" program injured at least 105,000 eligible borrowers.

The program, which was terminated in June 2010, offered zero percent interest rates on loans to Michigan college students after the first 36 payments were made on a loan held by the authority.

The finance authority had filed a lawsuit in state court law month against the pair after they filed notices in February certifying they would be pursuing actions against the authority. In the state court complaint, the finance authority alleged that the potential claims by Kiebler and Visser had jeopardized a plan to refinance student loan debt and save $54 million.

The state court action sought a declaratory judgment against the duo, asking an Ingham County judge to find that Kiebler and Visser had waited too long to pursue any claims related to the program.

According to court documents, the finance authority must finish repaying a $1 billion student loan refinancing agreement in November, and failure to do so would result in a default which would damage the authority's borrowing ability and cause losses of at least $54.2 million.

In their counter-claim, filed May 31 in U.S. District Court for the Western District of Michigan, Visser and Kiebler deny that they were required to file the notices which led to the state court suit, and allege that the finance authority did not give proper notice that the interest rate program could be terminated.

The counter-claim seeks class-action status on behalf of more than 105,000 borrowers who have made at least 36 months of on-time payments but have not received the interest rate reduction since the program was terminated, and asks a federal judge to issue an injunction against the finance authority requiring them to institute the zero percent interest rate on those loans.

As part of the removal to federal court, Kiebler and Visser also filed a formal answer to the state's allegations in the original suit. A federal judge struck that answer for failure to comply with procedural requirements and gave the duo's attorneys a Wednesday deadline to re-file. A check of court records on Monday failed to reveal an amended filing.

The pair are represented by Michigan attorneys Jeffrey Hank and Jason Thompson as well as lawyers from California and Georgia.

www.mlive.com

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