The proposed settlement, filed on January 16th, aims to resolve a lengthy legal battle initiated by the Consumer Financial Protection Bureau (CFPB) in 2017 against the National Collegiate Student Loan Trusts (NCSLT) for alleged improper debt collection practices.
Borrowers who held private student loans managed by the National Collegiate Student Loan Trusts (NCSLT) may soon receive a portion of a $2.25 million settlement for alleged improper debt collection practices. The proposed settlement, filed on January 16th, aims to resolve a lengthy legal battle initiated by the Consumer Financial Protection Bureau (CFPB) in 2017. The judgment, pending court approval, seeks to address years of deceptive and unfair practices that impacted thousands of borrowers.
The case highlights significant concerns about debt collection practices in the private student loan sector, particularly those involving securitized loans. The CFPB alleges that NCSLT engaged in unlawful lawsuits against borrowers, often lacking the necessary documentation to prove outstanding debts. The bureau contends that NCSLT's practices were unlawful for several reasons: unverified debts, the use of false affidavits in court, and attempts to collect debts after the statute of limitations had expired. Under the proposed settlement, NCSLT must halt collections on specific debts covered by the lawsuit and pay $2.25 million in restitution to borrowers who were harmed by these practices. Eligible borrowers will be contacted by the CFPB or an authorized third party.This lawsuit primarily affects private student loan borrowers, as federal student loans are not included in this resolution. Data from the Education Data Initiative reveals that while 92.4 percent of outstanding student loan debt is federal, 7.57 percent belongs to private borrowers. These private borrowers are the most likely to be impacted by the outcome of this case. The U.S. Court of Appeals for the Third Circuit confirmed in March 2024 that NCSLT is subject to federal consumer protection laws, paving the way for the proposed settlement. The CFPB emphasizes that this judgment serves as a reminder to debt buyers and securitized trusts about their responsibility to maintain proper records and documentation, highlighting the potential financial penalties they face for misleading borrowers. The judgment could also cast doubt on the validity of any future lawsuits filed by National Collegiate, potentially strengthening borrowers' positions in settlement negotiations and trials
STUDENT LOANS DEBT COLLECTION CONSUMER FINANCIAL PROTECTION BUREAU NATIONAL COLLEGIATE STUDENT LOAN TRUSTS LAWSUIT SETTLEMENT RESITUTION
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