The Consumer Financial Protection Bureau (CFPB) has proposed a $2.25 million compensation fund for student loan borrowers affected by improper debt collection practices. This proposed judgment targets the National Collegiate Student Loan Trusts (NCSLT), a group of 15 securitization trusts that purchase and service private student loans.
First, the judgment focuses on borrowers harmed by specific unlawful practices. According to the CFPB, NCSLT and its subservicers filed “thousands of lawsuits” to collect on loans without adequate documentation proving they owned the debt or that the borrowers owed it. Worse, some affidavits were reportedly “false and misleading,” with claims of personal knowledge that the signers didn’t have or improper notarization. Borrowers whose debts were pursued after the statute of limitations had expired are also included.
CFPB Director Rohit Chopra previously criticized NCSLT, describing it as a “web of investment trusts that failed student loan borrowers, including at the height of the pandemic.” The Trusts gained notoriety for using aggressive and, as alleged, deceptive tactics, which this judgment aims to correct.
Under the proposed judgment, NCSLT would be required not only to pay the $2.25 million to compensate affected borrowers but also to withdraw, dismiss, or terminate ongoing lawsuits connected to invalid or time-barred debts. They must also cease wage garnishments and other collection actions tied to these cases. As the CFPB explains, the funds will be distributed to borrowers harmed by these practices through a redress fund administered by the agency.
CFPB’s NCSLT case offers relief for borrowers
However, not every borrower with NCSLT loans will qualify. Relief will only cover accounts where documentation proving the debt’s validity is missing or where collection actions violated statutes of limitations. Unfortunately, this compensation does not include broader loan forgiveness or cancellation-something that typically applies only to federal loans under specific discharge programs.
Although the CFPB has not provided specific timelines or detailed guidance for affected borrowers, it encourages those potentially impacted to visit their website or call (855) 411-CFPB for more information.
If approved by the court, this judgment could bring long-awaited relief to borrowers plagued by NCSLT’s improper practices. As the CFPB’s proposed order states, the funds will be used to provide restitution, damages, or other monetary relief to affected consumers, ensuring accountability for these alleged violations.