The Consumer Financial Protection Bureau Takes Action
The Consumer Financial Protection Bureau (CFPB), a government agency that monitors financial companies to make sure they are treating consumers fairly, released a statement in September stating that they had reached a settlement in their proceedings against the National Collegiate Student Loan Trust (NCSLT) and the collections agency it retained, Transworld Systems, Inc.
The complaint filed by the Consumer Financial Protection Bureau alleged that NCSLT “violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act by filing false affidavits and for pursuing collections lawsuits” for debts they could not prove were owned.
The CFPB will be auditing all 800,000 of the loans that the NCSLT holds. According to the Consumer Financial Press release, the other settlement agreements included, if the final judgement passes, are as follows:
The NCSLT must pay 3.5 million in restitution, at minimum
Discontinue the practice of filing collections lawsuits on debts that cannot be legally sued over
Cease of all attempts to collect, reporting negative credit info, and suing consumers for debt without providing the proper documentation
End the filing of false or improperly notarized legal documents
NCSLT relinquish 7.8 million to the U.S. Treasury
NCSLT pay 7.8 million to the CFPB civil penalty fund
Transworld Systems, Inc. pay 2.5 million to the Civil Penalty Fund
The NCSLT owns a large group of trusts that hold thousands of loans transferred to them through the banking system. According to the Consumer Help Central article “National Collegiate Student Loan Trust: What You Need to Know,” these trusts allow for the loans to be “sold to investors” which then “entitles the investor to receive distributions from the trust.” In short, the trusts allow for investors to profit off consumer debt. However, if the loans default, there is little to no profit for investors.
The National Collegiate Student Loan Trust have created victims out of the consumers who took on student loans to pursue an education and will pay $21.6 million for their alleged illegal practices.
It is critical that we protect consumers from shoddy business practices which seek to take advantage of consumers lack of knowledge. These abuses of power should not go unregulated and should be addressed and litigated to discourage similar future practices.