Federal regulators crack down on private student loan debt-collection tactics

The National Collegiate Student Loan Trusts is the nation's largest holder of student loan debt, with more than 800,000 private student-loan debts in its portfolio.
By Paul Pate | Sep 19, 2017
Tens of thousands of student-loan borrowers could get relief from private student loan debts, following a settlement Monday between the Consumer Financial Protection Bureau (CFPB) and the National Collegiate Student Loan Trusts and its debt collector, Transworld Systems. Per the settlement, the federal agency ruled that the student loan holder and Transworld must pay at least $21 million in compensation for using illegal and sometimes fraudulent collection practices to extract debt payments from borrowers.
The National Collegiate Student Loan Trusts is the nation's largest holder of student loan debt, with more than 800,000 private student-loan debts in its portfolio. According to the federal agency, the student-loan holder and Transworld sued borrowers without providing enough proof that they owed the debts and used legal measures to collect on debts that were by law too old to sue over. The companies won some court cases against their borrowers by issuing false statements and misleading documents in court, the agency also alleged.
The National Collegiate Student Loan Trusts and their debt collector sued consumers for student loans they couldn't prove were owed and filed false and misleading affidavits in courts across the country," said Richard Cordray, director of the CFPB, in a statement.
The trust will pay at least $19.1 million in civil penalties, under the settlement's terms, while Transworld pays another $2.5 million. The companies will also submit to independent audits of every loan debt that they own to any consumers who suffered needless harm, and both must cease any lawsuits on debts whose statutes of limitations have expired.

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