Student loans with National Collegiate Trust
If debt collectors are calling, sending letters, or you're facing a lawsuit in court, it's important to understand the recent developments that could affect your legal rights and possible defenses.
As we reported earlier this month, National Collegiate was fined for student loan violations. This article highlights the concerns that were addressed in the consent order between the Consumer Financial Protection Bureau (CFPB) and National Collegiate Student Loan Trust. While consumers can take comfort in the fact that National Collegiate will be held responsible for their actions, it is important to understand the extent of their improprieties and the steps that are being taken to rectify them.
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CFPB Consent Order
On September 18th, the CFPB issued a consent order against National Collegiate Student Loan Trust. This consent order is an effort by the CFPB to rein in abusive debt collection practices by the firms that contract with National Collegiate to collect defaulted student debt. While there are many agencies that collect debts on behalf of National Collegiate, one particular law firm that has separetly come under fire from the CFPB is Weltman, Weiberg, & Reis.
Perhaps one of the most critical aspects of the National Collegiate consent order is the specific language that holds them responsible for the actions of its collection firms. National Collegiate Student Loans is a trust which poold together private student loans from a number of banks such as Bank of America, J.P. Morgan Chase, and many others. Being that National Collegiate has no physical employees, it relies on debt collection agencies and loan servicers such as Transworld Systems Inc. as a means of collecting upon a debt that enters default status. This relationship is crucial to understanding the consent order, as almost all of the provisions are said to apply to both National Collegiate and its partners. In many cases, the consent order provides specific instructions to National Collegiate that it must hold its collectors to a certain standard.
Enforcement Issues
Section I of the consent order provides that National Collegiate must ensure that all of its debt collection partners are duly notified and in compliance with the provisions of the order. Additionally, National Collegiate must ensure that its debt collecting partners do not pursue any debt collection lawsuits where they can not prove “chain of assignment”. This means that National Collegiate and its partners must have documentation evidencing the ownership/custody of a debt from its original creditor to the current trust. The order also prevents the initiation of a collection lawsuit in instances where National Collegiate and its partners are unable to produce a promissory note, which refers to documentation signed by the debtor stating that they consent to pay the debt.
Section I of the order also outlines provisions for preventing some of the other subversive methods through which National Collegiate pursued collection lawsuits. National Collegiate and its partners are prohibited from pursuing lawsuits on debts which are past their statute of limitations. Additionally, National Collegiate and its partners cannot collect on a debt in which an affidavit was filed that was misleading or falsified. Previously, affidavits for collections lawsuits on behalf of National Collegiate were filed where the affiant lacked any personal knowledge of the debt or the validity of the debt ownership.
Independent Audit & Statute of Limitations Disclosures
While the above stated provisions may be viewed as a reaction to the trusts' prior violations, the remainder of the consent order contains proactive measures to help ensure that the problematic conduct will not be repeated.
Section II of the order requires National Collegiate to hire an independent auditing firm to conduct an in depth investigation of all servicing and collecting done on behalf the trust. This could mean that all accounts since the inception of the National Collegiate trust may be reviewed to determine whether it is in compliance or violation of the order. Additionally, National Collegiate and its partners must also provide specific language on notices to debtors which informs them of the statute of limitations on their debt.
Compliance Plan
Section III of the order puts the responsibility on National Collegiate to construct a compliance plan within 120 day of the order being issued. The consent order requires that National Collegiate provide to the CFPB the specific steps they will take to ensure compliance with the order. National Collegiate will also provide written policies that outline the provisions of the order and prevent its violation. In order to comprehensively address the issue of false affidavits, the order requires National Collegiate to conduct employee training programs. It is hoped that through these training programs, future affiants will ensure proper notarization and verify the accuracy of the debt ownership stated on the affidavit.
Monetary Penalties & Disgorgement
The final sections (V,VI and VII) all deal with the monetary penalties incurred by National Collegiate as a result of its infractions. National Collegiate is ordered to pay a minimum of $3.5 million for the purposes of redressing those consumers harmed by its illegal actions. This redress includes full restitution for the amounts noted by the CFPB, but can also include any amounts discovered by the independent audit. Additionally, National Collegiate must pay $7.8 million in disgorgement to the U.S. Treasury. The disgorgement payment is the amount of profit that was made from the collection lawsuits. An additional $7.8 million dollars will be paid as a Civil Money Penalty, as required by section 107(d) of the CFPA.
Student Loan Defense Lawyers (NY & NJ)
At the Law Office of Simon Goldenberg, PLLC, we understand the tremendous stress a borrower can feel when facing the consequences of defaulting on a private student loan. Our goal in each and every case is to leave no stone unturned in obtaining an affordable and reasonable resolution. We offer vigorous defense from lawsuits brought by National Collegiate Student Loan Trust in New York and New Jersey, and we offer pre-litigation negotiation services to residents of some other states. We can help identify your defenses while protecting your consumer rights and advocating in favor of your interests.
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Not legal advice, for informational purposes only. Not responsible for typographical errors. See the actual consent order for the full information about this matter. Our law firm does not have any involvement or affiliation with the regulatory actions or lawsuits mentioned in this article. We are headquartered in New York City and we practice law only in NY and NJ. Contact us to learn how we can assist.