Student loans | Consumer Financial Protection Bureau

CFPB Takes Action Against National Collegiate Student Loan Trusts, Transworld Systems for Illegal Student Loan Debt Collection Lawsuits

WASHINGTON, D.C. – The Consumer Financial Protection Bureau right now took motion in opposition to the National Collegiate Student Loan Trusts and their debt collector, Transworld Systems, Inc., for unlawful student loan debt assortment lawsuits. Consumers had been sued for personal student loan debt that the businesses couldn’t show was owed or was too previous to sue over. These lawsuits relied on the submitting of false or deceptive authorized paperwork. The proposed judgment requires an unbiased audit of all 800,000 student loans within the National Collegiate Student Loan Trusts’ portfolio. It prohibits the National Collegiate Student Loan Trusts, and any firm they rent, from making an attempt to gather, reporting detrimental credit info, or submitting lawsuits on any loan the audit reveals is unverified or invalid. In addition, it requires the National Collegiate Student Loan Trusts to pay at the least $19.1 million, which incorporates preliminary redress to harmed shoppers, relinquished funds to the Treasury, and a civil cash penalty. Under a separate consent order, Transworld Systems, Inc. is ordered to pay a $2.5 million civil cash penalty. 

“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,” stated CFPB Director Richard Cordray. “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.”

The National Collegiate Student Loan Trusts are 15 Delaware statutory trusts that personal greater than 800,000 non-public student loans. Between 2001 and 2007, the trusts bought and securitized the loans, after which offered notes secured by the loans to buyers. The trusts haven’t any staff however as a substitute use service suppliers to work together with shoppers about their loans. Transworld Systems, Inc. is a nationwide debt collector included in California, with a principal administrative center in Ft. Washington, Pennsylvania. Transworld Systems staff full, signal, and notarize sworn authorized paperwork for collections lawsuits introduced on behalf of the trusts. Transworld Systems hires a nationwide community of regulation companies to file and prosecute collections lawsuits on behalf of the trusts in courts throughout the nation.

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The grievance in opposition to the National Collegiate Student Loan Trusts and the Bureau’s consent order relating to Transworld Systems embody allegations and findings that the businesses violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act by submitting false affidavits and for pursuing collections lawsuits they may not have received, if contested. Specifically, the businesses:

  • Sued shoppers for money owed the trusts couldn’t show had been owed: In order to sue to gather money owed, the particular person or firm submitting swimsuit should be capable to show that the buyer owed the debt and that they personal the loan that’s being collected. The corporations participated in unlawful litigation practices when suing shoppers with out the required documentation required to sue. Over 2,000 collections lawsuits had been filed on behalf of the trusts in violation of shopper monetary safety legal guidelines that forestall shoppers from having to pay money owed they don’t legally owe. In these lawsuits, the trusts do not need or can’t discover the documentation essential to show both that they personal the loans or that the buyer owed the debt. In a few of these circumstances, the doc the buyer signed promising to pay again the loan is lacking. Nonetheless, the trusts filed swimsuit in opposition to shoppers to gather the money owed.
  • Filed false and deceptive affidavits: In most of the collections lawsuits, false and deceptive affidavits had been filed. To be legitimate, these affidavits have to be signed by a witness with private data of the shoppers’ account information and the debt. In quite a few situations, affiants claimed private data of the student loan debt they didn’t have.

The Bureau additionally alleged that the National Collegiate Student Loan Trusts filed at the least 486 collections lawsuits after the relevant statute of limitations on the debt assortment had expired. Additionally, the grievance alleged that, in quite a few situations, most of the affidavits filed had been improperly notarized as a result of they weren’t sworn or signed within the presence of the notary. 

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Enforcement motion

Under the Dodd-Frank Act, the Bureau has the authority to take motion in opposition to establishments or people participating in unfair, misleading, or abusive acts or practices or that in any other case violate federal shopper monetary legal guidelines. Under the phrases of the proposed remaining judgment and consent order, the Bureau is requiring the businesses to:

  • Conduct an intensive audit of the 800,000 student loans in its portfolio: The proposed remaining judgment requires the National Collegiate Student Loan Trusts to rent an unbiased auditor acceptable to the Bureau to audit their student loan accounts. If the audit identifies any extra student loans for which the trusts lack the documentation wanted to show the buyer owed the debt, the National Collegiate Student Loan Trusts will stop all collections on these loans.
  • Pay at the least $3.5 million in restitution: Under the proposed remaining judgment, the National Collegiate Student Loan Trusts is ordered to pay at the least $3.5 million in restitution to greater than 2,000 harmed shoppers who made funds after being sued by the trusts on a loan the place documentation was lacking or the statute of limitations had expired. Furthermore, below the proposed remaining judgment, the National Collegiate Student Loan Trusts is required to supply restitution to extra shoppers recognized via the unbiased audit. Consumers who imagine they had been harmed don’t have to take any motion presently. If they’re eligible for restitution, the corporate will contact them straight. Consumers who’re unhappy with the response or produce other complaints about these practices can submit a grievance with the Bureau.
  • Stop submitting collections lawsuits on debt that may not legally be sued over: Statutes of limitation restrict the period of time a person or firm can go after somebody in court docket for a debt that’s allegedly owed. Under the phrases of the proposed remaining judgment and the consent order, the businesses are prohibited from tying shoppers up in litigation after the expiration of the relevant statute of limitations.
  • Stop making an attempt to gather, reporting detrimental credit info, and suing shoppers for debt with out correct documentation: Under the phrases of the proposed remaining judgment and the consent order, the businesses are prohibited not solely from suing with out documentation, but additionally from accumulating and reporting detrimental credit info with out documentation.
  • Stop submitting false or improperly notarized authorized paperwork: Under the phrases of the proposed remaining judgment and the consent order, the businesses are prohibited from submitting false or deceptive authorized paperwork and are required to make sure all paperwork that require notarization are correctly notarized. 
  • Pay $7.8 million in disgorgement: Under the phrases of the proposed remaining judgment, the National Collegiate Student Loan Trusts should relinquish $7.8 million to the U.S. Treasury.
  • Pay a $7.8 million civil cash penalty: : Under the phrases of the proposed remaining judgment, the National Collegiate Student Loan Trusts should pay $7.8 million to the Bureau’s Civil Penalty Fund.
  • Pay a $2.5 million civil cash penalty: Transworld Systems should pay $2.5 million to the Bureau’s Civil Penalty Fund below the consent order.
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The proposed judgment in opposition to the National Collegiate Student Loan Trusts has been filed with the U.S. District Court for the District of Delaware, and it’s efficient provided that accepted by the presiding choose. The consent order is efficient instantly.

A duplicate of the grievance filed in federal district court docket in opposition to the National Collegiate Student Loan Trusts is on the market at: https://files.consumerfinance.gov/f/documents/201709_cfpb_national-collegiate-student-loan-trusts_complaint.pdf

A duplicate of the proposed remaining judgment filed in federal district court docket in opposition to the National Collegiate Student Loan Trusts is on the market at: https://files.consumerfinance.gov/f/documents/201709_cfpb_national-collegiate-student-loan-trusts_proposed-consent-judgment.pdf

A duplicate of the consent order entered right now in opposition to Transworld Systems, Inc. is on the market at: https://files.consumerfinance.gov/f/documents/201709_cfpb_transworld-systems_consent-order.pdf

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The Consumer Financial Protection Bureau (CFPB) is a twenty first century company that helps shopper finance markets work by making guidelines simpler, by persistently and pretty implementing these guidelines, and by empowering shoppers to take extra management over their financial lives. For extra info, go to www.consumerfinance.gov.

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