WASHINGTON, D.C. – According to the Consumer Financial Protection Bureau (CFPB), the National Collegiate Student Loan Trusts and their debt collector, Transworld Systems, Inc. together filed more than 2,000 illegal student loan debt collection lawsuits between 2001 and 2007. The actions were violations of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act. Specifically, the lawsuits filed lacked required documentation and included both false and misleading affidavits. Many of the lawsuits pursued debts the trusts could not prove were owed. Additionally at least another 486 collections lawsuits were filed after the applicable statute of limitations on the debt collection had expired.
National College Student Loan Trusts will now pay at least $21.6 million in initial redress to harmed consumers. Transworld Systems, Inc. was ordered to pay a $2.5 million civil money penalty. An independent audit of 800,000 student loans in National Collegiate portfolio were also ordered. The enforcement actions also require the firms to stop a number of practices including: lawsuits that are no longer legal, reporting negative credit information, filing false or improperly notarized legal documents, and attempts to collect debt.
CRL's Whitney Barkley-Denney, Policy Counsel, issued the following statement:
We commend the CFPB for taking decisive action against these two firms that abused consumers and the court system in pursuit of false claims. In recent years, debt collectors have flooded court dockets with cases that were brought with misleading and erroneous information. In many of these cases, consumers were not properly notified of the action and were therefore unable to appear in court with an attorney or even in their own defense.
In a global economy, higher education is increasingly important for consumers and businesses alike. The considerable investment undertaken in its pursuit should not be exploited by unsavory actors that disregard the law and file unverified lawsuits.
This example of decisive action is another reason why an independent CFPB must remain the consumer's financial cop-on-the-beat.
For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Charlene Crowell at charlene.crowell@responsiblelending.org.