CFPB Saves 2,000 Borrowers from Illegal Student Loan Lawsuits
Sep 20th, 2017 @ 12:08 PM by Amber Nelson
The trusts pursued about 94,000 lawsuits against borrowers who defaulted between 2012 and 2016. The lawsuits were on student loans that were either too old to be collected (past the statute of limitations) or the trusts did not physically have the legal paperwork proving a connection between the borrower and the loan. There were also instances of false and misleading affadavits where witnesses claimed to have ‘personal knowledge of the student loan debt they did not have.’
“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,” said CFPB Director Richard Cordray in a statement. “We’re … stopping them from filing illegal lawsuits, and requiring the trusts to thoroughly audit their loan portfolios to identify any other consumers who were harmed.”
The CFPB’s proposed settlement, pending court approval, will result in a $3.5 million refund to affected borrowers who received loans between 2001 and 2007. It purchased those loans and securitized them as notess for investors.
National Collegiate Student Loan Trusts will also have to review all of their 800,000 student loans through audits. These audits could reveal more problems with loan documentation. If the trusts find any loans on their books which are lacking the proper paperwork, they are required to stop collection on them.
Additionally, the trusts have agreed to pay a total of $19 million in refunds and legal penalties, with more required if any more illegal actions are discovered in the course of the audits.
Any borrowers affected by the settlement will be contacted by the CFPB and do not need to take any action.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.