CFPB moves closer to enforcement action on student loan issuer

The Consumer Financial Protection Bureau moved one step closer to resolving its case against the National Collegiate Student Loan Trusts, which it said improperly filed debt collection lawsuits against private borrowers.

The agency proposed a stipulated judgment to a federal court that would require the National Collegiate Student Loan Trusts, which sell student loan asset-backed securities (ABS) to investors, to pay $2.25 million in fines to borrowers who were harmed, according to a statement from the CFPB.

The strength of the lawsuit is in a 3rd U.S. Circuit Court of Appeals ruling that the National Collegiate Student Loan Trusts are covered persons and subject to the CFPB's enforcement actions. The securitization platform is now defunct, and September 2007 was one of the last times it issued any securities, according to Asset Securitization Report's deal database.

Should the appeals court enter the judgment, the CFPB would also require National Collegiate Student Loan Trusts to end certain debt collection lawsuits, and other debt collection activities, the CFPB said.

The dispute dates back to 2017, when the CFPB filed a lawsuit against the trusts. Separately, the CFPB took enforcement action against the trusts and the Pennsylvania Higher Education Assistance Agency (PHEAA) in May 2024, for failing to respond to borrowers seeking relief from student loan payments, including during the COVID-19 pandemic.