U.S. cracks down on debt collection of private student loans

Reuters News
Posted: Sep 18, 2017 1:15 PM

WASHINGTON (Reuters) - The U.S. Consumer Financial Protection Bureau said on Monday it had ordered National Collegiate Student Loan Trusts and their debt collector, Transworld Systems, Inc to pay at least $21.6 million in penalties and restitution for illegally filing debt collection lawsuits.

According to the agency, the companies allegedly sued borrowers without being able to prove the debt was owed or pursued collection on loans that were too old to sue over, and relied on false and misleading legal documents. The CFPB said the trusts had filed at least 486 lawsuits on debt where the statute of limitations for collections had expired.

A federal judge must still sign off on the judgments against the National Collegiate Student Loan Trusts, a collection of 15 trusts that own more than 800,000 private student loans.

Transworld Systems agreed to pay a $2.5 million fine, stop suing borrowers over expired debts, and take other measures without admitting or denying the CFPB's findings.

(Reporting by Lisa Lambert, editing by G Crosse)