Student Loan Creditor Must Stop Collections Due to False and Misleading Practices

Have you heard about allegations against National Collegiate Student Loan Trusts? Student borrowers with loans held by this creditor have made allegations about fraudulent lending and collection practices. In response to those complaints, the creditor settled with the Consumer Financial Protection Bureau (CFPB) for “nearly $19 million in penalties and borrower refunds,” according to a recent report in The New York Times. In addition, National Collegiate Student Loan Trusts “could be on the hook for millions in additional payments and forgiven loans.” And it is not the only entity that will be paying up. Transworld Systems, a debt collection company hired by National Collegiate, “will pay an additional $2.5 million.”
What are some of the harmful practices in which National Collegiate engaged? What can consumers do if they have been impacted by these allegedly false and misleading debt practices?
Filing Claims Against Consumers without Proof of Loan Documents
One of the major allegations against National Collegiate was that it “sued consumers for student loans they couldn’t prove were owed.” In other words, National Collegiate brought claims against consumers without having clear information about the debts those borrowers actually owed. In addition—and related to the first allegations—National Collegiate’s settlement addresses allegations that the creditor “filed false and misleading affidavits in courts across the country” related to collection practices.
In agreeing to a $19 million settlement, the creditor has also agreed to “set aside $3.5 million for refunds to 2,000 borrowers.” According to the report, the borrowers who may be eligible for a refund made payments on loans after they were sued by National Collegiate for debts that they were not required by law to pay. Generally speaking, there were two primary scenarios in which National College sued consumers and obtained payments that it should not have been able to collect:
  • Statute of limitations passed on the claim; and/or
  • Creditor lacked the proper documentation it needed to collect the debt through a lawsuit.
This is good news for consumers who know they were affected, and it may be good news for thousands of additional borrowers. To be sure, the CFPB will now be looking into approximately 800,000 more loans. It is possible that a lot more borrowers could be eligible for a refund.
Creditor Prohibited from Collecting on Certain Debts
While the CFPB is investigating National Collegiate’s practices with regard to all of its loans, the creditor will not be permitted to collect on any debts unless it can prove that the borrower actually owes the debt and that it is not a time-barred debt. As the report in The New York Times emphasizes, if National Collegiate has used false or misleading practices in attempting to collect on additional loans not covered by the recent settlement, it could end up paying a lot more than the total of $21 million for which it is already will be paying.
In addition to National Collegiate, the CFPB also issued a consent order against Transworld, a debt collector employed by National Collegiate. The Bureau alleged that the debt collector “falsely claimed personal knowledge of the accounts records and the consumer’s debt” in attempting to recover.
How can you know if you may be eligible for compensation from the settlement? If you have made payments on loans to National Collegiate, or have faced harmful debt collection practices by Transworld, you should speak with an Oak Park consumer protection lawyer as soon as possible. Contact the Emerson Law Firm today to get started.
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Comments

  1. Tony QuartSeptember 22, 2017 at 11:21 PM

    I think the authority should make some kind of seminars or something that could make people know about these debt collection laws, and how to anticipate debt collection's unfair acts. I have just read a nice article about this at https://www.lemberglaw.com/unfair-debt-collection/. I think people should know about the laws and our own rights against debt collectors.

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