The CFPB and the National Collegiate Student Loan Trusts—a group of fifteen securitization trusts that acquire, pool, and securitize student loans—have entered into a proposed final consent judgment that, if approved, would resolve the CFPB’s allegations that the Trusts unlawfully filed defective debt collection lawsuits to collect on private student loans. In the consent order, the Trusts neither admitted nor denied the CFPB’s claims. The consent order comes after the Supreme Court declined to consider an appeal from the Trusts, which challenged lower court rulings that the Trusts were covered persons under the Consumer Financial Protection Act (CFPA) and thus subject to the enforcement jurisdiction of the CFPB.
The CFPB filed suit against the Trusts in 2017, alleging that the Trusts had sued consumers for debts that were not owed, filed false and misleading affidavits, and attempted to collect loans after expiration of the statute of limitations for collection. The Trusts moved to dismiss on the grounds that because they had no employees and took no direct action, they did not “engage” in providing or offering consumer financial products or services, and therefore were not “covered persons” subject to suit under the CFPA.
In March 2024, the Third Circuit Court of Appeals ruled that per the Trusts’ own Trust Agreements, the purpose of the Trusts was to “engage” in various specific activities, including acquiring student loans, servicing those loans (through servicing agreements), and collecting on those loans (through administration agreements). On that basis, the Court concluded that the Trusts “fall within the purview of the CFPA” and are subject to the CFPB’s enforcement authority.
In December 2024, the Supreme Court declined to hear the Trusts’ appeal, leaving the Third Circuit decision in place, and thus leaving open the possibility that other securitization vehicles may face similar investigations and enforcement actions in the future.
In settling the case, the CFPB and the Trusts have filed a proposed stipulated judgment in U.S. District Court for the District of Delaware that, if approved, would require the Trusts to pay $2.25 million to student borrowers who were harmed and to stop collecting on debts covered by the lawsuit.
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