By: Robert J. Nahoum
Much like the mortgages involved in the financial and foreclosure crisis of just a few years ago, private student loans are packaged together as investments and sold on Wall Street. Those packages of loans are held in trusts and managed by NCSLT. When a particular private student loan borrower falls behind on a NCSLT managed student loan, NCSLT is the one who sues the borrower.
On Monday, September 18, 2017 the Consumer Financial Protection Bureau (“CFPB”) announced that it had settled an enforcement proceeding against NCSLT and its debt collection agent Transworld Systems, Inc. (“TSI”) for illegal student loan debt collection practices.
Consumers were sued for private student loan debt that the companies couldn’t prove was owed or was too old to sue over. These lawsuits relied on the filing of false or misleading legal documents. The proposed judgment requires an independent audit of all 800,000 student loans in the National Collegiate Student Loan Trusts’ portfolio. It prohibits the National Collegiate Student Loan Trusts, and any company they hire, from attempting to collect, reporting negative credit information, or filing lawsuits on any loan the audit shows is unverified or invalid. In addition, it requires the National Collegiate Student Loan Trusts to pay at least $19.1 million, which includes initial redress to harmed consumers, relinquished funds to the Treasury, and a civil money penalty. Under a separate consent order, Transworld Systems, Inc. is ordered to pay a $2.5 million civil money penalty.
CFPB Director Richard Cordray stated that:
The National Collegiate Student Loan Trusts and their debt collector sued consumers for student loans they couldn’t prove were owed and filed false and misleading affidavits in courts across the country. We’re ordering them to pay at least $21.6 million, stopping them from filing illegal lawsuits, and requiring the trusts to thoroughly audit their loan portfolios to identify any other consumers who were harmed.
Among the allegations against NCSLT and TSI, it was alleged by the CFPB that NCSLT
- Relied on faulty affidavits that were not properly notarized;
- Relied on false and misleading affidavits and other court filings,
- Sued borrowers for debts the they could not prove were owed; and
- Sued consumers beyond the statute of limitations.
Under the terms of the settlement, NCSLT has agreed to:
- Conduct a thorough audit of the roughly 800,000 student loans in claims to own;
- Pay at least $3.5 million in restitution;
- Cease filing collections lawsuits on time barred claims;
- Cease attempting to collect, reporting negative credit information, and suing consumers for debt without proper documentation;
- Cease filing false or improperly notarized legal documents;
- TSI must pay a $2.5 million civil money penalty;
- NCSLT must pay $7.8 million in disgorgement; and
- NCSLT must pay a $7.8 million in penalties.
If you need help settling or defending a debt collection law suit, stopping harassing debt collectors or suing a debt collector, contact us today to see what we can do for you. With office located in the Bronx, Brooklyn and Rockland County, the Law Offices of Robert J. Nahoum defends consumers in debt collection cases throughout the Tristate area including New Jersey.