Class Status Denied in Sallie Mae Loan Suit

     SAN FRANCISCO (CN) - Two California women cannot represent a class accusing Sallie Mae of charging trumped-up late fees on student loans, a federal judge ruled.
     Chanee Thurston and Tina Ubaldi took out Private Education Loans, known as CEC Signature Loans, between 2001 and 2003. They claim they made the loans with Stillwater National Bank in Oklahoma and other such institutions, but that Sallie Mae actually makes the loans "via standing credit and purchase agreements with the bank[s]."
     The theory is that, "despite Stillwater's status as the official designation as the lender on loan documents, Sallie Mae is the de facto lender of the student loans at issue, and banks such as Stillwater simply rent their charters to Sallie Mae so that it can avoid California's more stringent protection of borrowers," Chief U.S. Magistrate Judge Elizabeth Laporte wrote Monday. "Whether Sallie Mae or Stillwater is the true lender affects, among other things, preemption under the National Bank Act and whether the choice of law provisions in the promissory notes are enforceable."
     The plaintiffs say Sallie Mae is the de facto lender for thousands of borrowers throughout California and provisions of those loans violate several California laws.
     Ubaldi had filed the suit against SLM Corporation in March 2007, and Thurston joined as a plaintiff last year. The third amended complaint added Sallie Mae and SLM Student Loan Trust 2004-A as defendants. It also claims Sallie Mae "charged usurious interest on loans" and late fees, and seeks an order declaring the choice of law provisions unenforceable.
     A choice-of-law provision in the promissory notes allegedly states "the notes would be governed by the laws of the state listed on the front of the note, which was Oklahoma in all of plaintiffs' loans."
     The U.S. Department of the Treasury has since confirmed that Sallie Mae is the actual lender, according to the complaint.
     Ubaldi and Thurston moved to certify the Choice-of-Law class, and the Late Charge and Usury subclasses, this past October, submitted evidence purportedly showing "that putative class members in this case were subject to similar choice of law provisions, late fees and interest," Laporte said.
     The 22-page order denied certification of all three classes, with Laporte saying the "proposed class definitions are circular and render the classes unascertainable."
     Laporte continued: "Plaintiffs do not explain how they intend to send class notice to those who obtained a loan for which Sallie Mae was the de facto lender when the trier of fact has not decided whether Sallie Mae was a de facto lender ... Because it appears that plaintiffs may be able to redefine the classes in terms of attributes of class members or loans than legal conclusions, plaintiffs have leave to amend the class definitions."