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The Consumer Financial Protection Bureau on Monday ordered a collection of trusts that hold billions in private student loans to stop collecting on debt and pay a settlement restoring harmed borrowers.
The New York Times reported in July that judges in multiple states had tossed out debt collection lawsuits brought by National Collegiate Student Loan Trusts because ownership of the debts could not be verified. The CFPB's enforcement action found that the trusts had brought more than 2,000 such lawsuits without proper documentation in violation of consumer protection laws. And in many of those lawsuits, false or misleading affidavits were filed, the agency said.
CFPB is seeking an independent audit of all 800,000 student loans held by the trusts. And it is ordering the trusts and their debt collector, Transworld Systems, Inc., to pay $21.6 million in payments to borrowers and civil penalties.
A consent order against Transworld is effective immediately. A proposed judgment against the trusts will be effective if approved by the presiding judge in the U.S. District Court for the District of Delaware.
