The Consumer Financial Protection Bureau has been in a long standing battle with the National Collegiate Student Loan Trusts (“NCSLT”) since 2017 seeking to hold them liable under the Consumer Financial Protection Act (“CFPA”). NCSLT appealed the decision to the Third Circuit who just answered unequivocally that NCSLT is indeed subject to the CFPA. What does that mean for you?
When NCSLT sues a borrower, it is incumbent on a borrower to push back to require NCSLT to prove that it owns the debt. No borrower ever signed a contract with NCSLT so it can only sue if you it can prove the chain of title of how your loan got from the private bank on your promissory note through intervening entities before it could ever get to the National Collegiate Trust claims to own it. There are myriad of landmines in these documents which have resulted in the dismissal of many NCSLT lawsuits and led to the long standing battle with the CFPB who alleges it relies on false affidavits because it does not have the necessary documents to prove it owns any particular debt. There is one document in particular called a Pool Supplement which is central to the failure of proof that NCSLT runs into in trying to convince a court that it actually owns a particular debt. The first page of the Pool Supplement refers the reader to an attached exhibit called Schedule 1 or 2 at the end of the Pool Supplement where all of the student loans being transferred are supposed to appear. In every case I have had to date involving NCSLT, Schedule 1 or 2 of all the Pool Supplements i have reviewed is either blank or missing. That is what makes it difficult for NCSLT to prove it owns any particular student loan. The absence of paperwork proving NCSLT owns the loans as well as the affidavits ignoring this problem in large part is what led to the the CFPB lawsuit against NCSLT in the Third Circuit. These are real issues that aren’t going away because the original paperwork is on file at the SEC when it was filed 15 to 20 years ago. These issues often fly under the radar, however, leading to NCSLT getting default judgments when borrowers fail to raise the issue. I have dismissed many lawsuits filed by NCSLT but it is up to the borrower being sued to raise the issues either in an Answer or by filing a Motion to Dismiss and the time pressure created by a lawsuit often permits NCSLT to hide behind the scores of pages of securitization documents in which these issues are buried. . I was just looking at lawsuits filed by NCSLT in New Hampshire and it is sad to see how few borrowers have held NCSLT to its burden of proof. If you get a letter from a local lawyer in your state representing NCSLT a lawsuit is usually the next thing you will see. Don’t sit on your rights in this situation. There is never a guarantee of a particular result and obviously if you’re sued in small claims court a cost/benefit analysis might weigh against hiring a lawyer. But if the amount NCSLT is suing for is signficant enough it will be collectible in New Hampshire for 20 years so you may want to look into the possibility of fighting back while you still have a chance. These are difficult issues and it is never easy to know when to fight back but if you’re looking at a crippling judgment any lawyer worth his salt will tell you whether the above issues exist in your case. Peace.