National Collegiate allegedly lacked the documentation needed to collect on loans in court
One of America’s largest student loan creditors has reached a settlement with federal regulators regarding “false” lawsuits against debtors. According to the New York Times, the National Collegiate Student Loan Trusts, which holds $12 billion in student loan debt, will be required to pay a fine of $19 million in refunds and penalties and will potentially have to pay millions more in additional payments and forgiven loans. A debt collector retained by National Collegiate, Transworld Systems, will pay an additional $2.5 million.
The settlement comes after the Consumer Financial Protection Bureau (CFPB) accused National Collegiate, which holds loans originally issued by banks, of suing individuals for student loans that they couldn’t prove were actually owed, and filing false and misleading court affidavits across the nation.
As part of the settlement, National Collegiate agreed to set aside $3.5 million to make refunds to some 2,000 borrowers, who had made payments after being sued over loans that were legally uncollectable. On some loans, the statute of limitations had already expired; on others, National Collegiate allegedly lacked the documentation necessary to collect on those loans in court.
According to the WashingtonPost, the 15 trusts represented by National Collegiate purchased hundreds of thousands of private student loans in the lead-up to the 2008 financial crisis, mirroring the circumstances of the subprime mortgage crisis. According to the complaint, in many cases, the documentation on those loans was woefully-inadequate…