New Letter From KeyBank

All former Silver State Helicopters students with outstanding loans from KeyBank can expect to receive a letter from KeyBank, typically dated June 15, 2010, based on the following template:

KeyBank
4910 Tiedeman Road
Brooklyn, OH 44144

Name
Address

Student Loan Acct#

Dear __________________:

KeyBank is corresponding with you regarding the loans that you obtained to attend Silver State Helicopters. In connection with certain legal proceedings brought in California against KeyBank and other student lenders concerning the closure of Silver State, KeyBank voluntarily suspended collection and reporting activity on your account. The California law suit against KeyBank has been dismissed. A federal judge has determined that KeyBank has no liability to student borrowers for any failures of Silver State to deliver the educational program.

This letter is to advise you that your account will be removed from forbearance and applicable collection activity will resume, including credit bureau reporting. If your account is delinquent, payment arrangements should me made as soon as possible, but not later than July 15, 2010 if you wish to avoid collection activity.

KeyBank understands the difficulty that Silver State's closure caused to many students, particularly those enrolled at the time of closure. KeyBank stopped making loans to Silver State students nearly three years before the school closed. Many KeyBank loan borrowers obtained all or substantial portions of the training contemplated as the SSH program was 18 months long in duration. KeyBank expects students to accept financial responsibility for his/her individual decision to attend SSH and the training they actually received.

If you received less than the flight hours contained in the student agreement, KeyBank may entertain a reduction in your total debt. If you would like KeyBank to entertain a reduction to your debt or you need to discuss payment arrangements, you must contact us at 1-877-593-6608.

Key Education Resources

I have discussed this letter with many of my clients. I have also discussed it with Scott O'Connell of Nixon Peabody, counsel for KeyBank. Here are a few points for all of my KeyBank clients to note regarding the June 15, KeyBank letter:

1. I have informed counsel for KeyBank that all settlement negotiations for my clients are to go through me. Counsel for KeyBank understands this and has so instructed his client. If I represent you on the SSH matter, you do not need to call the 1-877-593-6608 Key Educational Risk Management telephone number. If I do not represent you on the SSH matter, you may hire other counsel to negotiate with KeyBank or you may proceed on your own.

2. It is true that the proposed class action filed in Northern California by Pinnacle Law Group has been dismissed by a federal judge. This dismissal, however, is on appeal. Andy August of Pinnacle Law Group has told me that he believes that he will prevail on the appeal. I expect to publish another blog update about this appeal in the near future. Please note that this proposed class action is for California residents only. I am not aware of any pending action against KeyBank on behalf of former students of SSH who do not reside in California.

3. Please note that the letter states that "collection activity will resume, including credit bureau reporting," but it does not state that the borrower will be sued, not does it state that arbitration proceedings will be started against the borrower.

4. Unlike Student Loan Xpress, which focused on the number of flight certifications that former student borrowers received from Silver State Helicopters ("SSH"), KeyBank has focused on the number of flight hours that its former SSH student borrowers received while attending SSH. SSH contracts typically provided for (amongst other things) 175 flight hours. This is the context for the statement in the June 15 KeyBank letter, "If you received less than the flight hours contained in the student agreement, KeyBank may entertain a reduction in your total debt."
This focus on flight hours is generally less favorable for my clients than a focus on flight certifications achieved, but there are exceptions.

5. While the written confidentiality agreement between myself and counsel for KeyBank regarding settlement negotiations is still in effect, I can now reveal the 2 part formerly secret formula by which KeyBank has based its offers to my California clients and by which KeyBank apparently now intends to base offers to all former SSH students with KeyBank loans throughout the country:

Part a: The # of your flight hours @ SSH/175 x your principal loan balance = the proposed reduced amount of the principal part of your loan balance if the # of your flight hours is less than 175. If the number of your flight hours is 175 or more, there is no offer of a principal reduction.

Part b: Interest on the promissory note is cut in half from the start of accrual of interest to the date of acceptance of the KeyBank offer.

This revelation is made after my discussion with opposing counsel, after receipt of 42 proposed settlement letters, and after KeyBank's disclosures as set forth in the Jne 15, 2010 letters. There is no guarantee that KeyBank will continue to use this formula in the future, but I believe that it will.

One thing that is NOT part of the KeyBank settelement formula for now is financial hardship. Nevertheless, I am collecting financial hardship information from my KeyBank clients in anticipation that this may change at some time in the future. In my opinion, KeyBank's current unwillingness to consider the financial hardship of the borrower and the resulting difficulty that KeyBank would have to collect on its debt is both unfair and unwise.


If you are one of my KeyBank clients and you are interested in receiving a settlement offer from KeyBank based on the number of your flight hours @ SSH, please e-mail me with your flight hours and a copy of your flight log. If you are suffering from financial hardship, please write to me about this as well. I will follow up for you.

If you are one of my clients that do not want to accept any such offer, this will leave you with the choice of paying as KeyBank demands or having KeyBank place you in collection. No one can guarantee that you will get better results later. Personally, I would not accept any settlement that did not give me a substantial principal reduction.

Whatever choice you make, I will continue to use my best efforts on your behalf.