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
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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.
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
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.
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.
Get help with National Collegiate Trust!
Call today to speak to a
Student Loan Debt Lawyer -
If you've been contacted by a student loan debt collector or you've
been issued a
student loan lawsuit, contact our experienced legal team to learn your options for relief.
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.