National Collegiate Student Loan Trusts to Settle CFPB Allegations of Illegal Debt Collection
The Consumer Financial Protection Bureau (CFPB) and the National Collegiate Student Loan Trusts have filed a proposed stipulated judgment to resolve the regulator’s lawsuit alleging that the trusts had illegal debt collection practices.
If entered by the court, the proposed stipulated judgment would require the trusts to pay $2.25 million in redress to student borrowers who were harmed and stop collecting on certain debts covered by the lawsuit, the CFPB said in a Thursday (Jan. 16) press release.
The CFPB filed the lawsuit in 2017 alleging that the trusts’ subservicers, acting on behalf of the trusts, sued thousands of consumers for debts the trusts could not prove were owed; filed false and misleading affidavits claiming knowledge of the student loan debt they did not have and misrepresenting that the affidavits were properly notarized; and attempted to collect on debts after the statute of limitations expired, according to the release.
The trusts claimed that they were not covered under the Consumer Financial Protection Act, but a United States Court of Appeals ruled in March that they are covered by the act, and the Supreme Court declined in December to hear the trusts’ appeal, per the release.
“Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating consumer financial protection laws, including by engaging in unfair, deceptive or abusive acts or practices,” the release said.
In a separate case, the CFPB took action in May against the trusts and the Pennsylvania Higher Education Assistance Agency (PHEAA), alleging that they failed to respond to student loan borrowers seeking payment relief.
“The CFPB has taken action against a web of investment trusts that failed student loan borrowers, including at the height of the pandemic,” the agency said at the time in a press release. “Our law enforcement action makes clear that investors cannot sidestep accountability by playing games of corporate musical chairs.”
When reporting results of a survey encompassing the entire industry, the CFPB said in November that 63% of borrowers said they had difficulty making their student loan payments and 37% said they had missed at least one payment.
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