RSSThe Consumer Financial Protection Bureau recently filed a $5 million lawsuit against student loan servicers National Collegiate Student Loan Trusts and American Education Services for allegedly ignoring thousands of payment relief requests over six years.
The proposed final judgments would require American Education Services and National Collegiate Student Loan Trusts to pay $1.75 million and $400,000 in fines, respectively. The companies would also pay nearly $3 million to harmed borrowers, including $200 payments to borrowers who didn’t receive timely responses to exception requests.
The CFPB alleges both companies violated the Consumer Financial Protection Act by not answering thousands of borrower requests for payment relief — co-signer releases, extension of deferment or forbearance and loan forgiveness or settlement — from 2015-21.
The National Collegiate Student Loan Trusts’ internal procedures for handling borrower requests allegedly failed in 2015, and the company didn’t take the necessary steps to fix them. The groups didn’t respond to borrowers seeking relief from student loan payments during the pandemic, according to the CFPB.
“PHEAA misrepresented to consumers that certain requests would be answered, when, in fact, the company knew that they would not,” according to the CFPB. “The company also failed to inform borrowers that forbearance requests submitted to the National Collegiate Student Loan Trusts would not be appropriately processed, and that other payment relief options were available.”
National Collegiate Student Loan Trusts include 15 securitization trusts organized under Delaware law. The company acquires, pools and securitizes student loans before servicing them. As of February, the company held 163,000 private student loans with more than $900 million in outstanding balances.
Harrisburg, Pa.-based American Education Services serviced a student loan portfolio worth $17.8 billion as of December 2023. The company has been the primary servicer for loans held by National Collegiate Student Loan Trusts for at least 18 years.
This is CFPB’S second public enforcement action against National Collegiate Student Loan Trusts. The bureau earlier sued the company alleging it brought improper debt collection lawsuits for private student loan debt it could not demonstrate was owed or that was too old to sue for.
“The CFPB has taken action against a web of investment trusts that failed student loan borrowers, including at the height of the pandemic,” said CFPB Director Rohit Chopra. “Our law enforcement action makes clear that investors cannot sidestep accountability by playing games of corporate musical chairs.”
