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CFPB Cites Private Student Loan Trusts and Debt Collector

Wed 20 Sep, 2017  /  by McIntyre & Lemon  /   Client Alerts

09/20/17 – The Consumer Financial Protection Bureau (CFPB) sued private student loan trusts and took an enforcement action against a debt collector for student loan debt collection lawsuits that the CFPB claims are illegal.

According to the CFPB, the companies sued consumers for private student loan debt that the companies could not prove was owed or was too old to sue over.

The private student loan trusts are 15 Delaware statutory trusts that own more than 800,000 private student loans. Between 2001 and 2007, the trusts purchased and securitized the loans, and then sold notes secured by the loans to investors. To collect on the private student loan debts, the trusts used a nationwide debt collector based out of Ft. Washington, Pennsylvania. The debt collector’s employees completed, signed, and notarized sworn legal documents for collections lawsuits brought on behalf of the trusts.

The CFPB alleges that the private student loan trusts and the debt collector violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act by filing false affidavits and for pursuing collections lawsuits they could not have won, if contested. Specifically, the CFPB alleges that the companies:

  • Sued consumers for debts the trusts could not prove were owed because the trusts did not have or could not find the documentation necessary to prove either that they owned the loans or that the consumer owed the debt.
  • Filed false and misleading affidavits that claimed that the person signing the affidavit had personal knowledge of the consumers’ account records and the debt, which the person did not actually have.

The CFPB also alleged that the companies filed collection lawsuits after the applicable statute of limitations on the debt collection had expired. Additionally, the Bureau alleged that many of the affidavits were improperly notarized because they were not sworn or signed in the presence of the notary.

In addition to filing a lawsuit, the CFPB also proposed a judgment that would require the private student loan trusts to pay at least $19.1 million. Under a separate consent order, the CFPB is ordering the debt collector to pay a $2.5 million civil money penalty.

CFPB Press Release; Complaint; Proposed Judgement; Consent Order.