The CFPB has taken action against an agent and service provider (“Agent”) for fifteen Delaware statutory student loan trusts for violations of the Consumer Financial Protection Act (“CFPA”) in regards to its allegedly deceptive debt collection practices for private student loans. A collection of student loan trusts hired Agent to execute and notarize affidavits for collection lawsuits brought on behalf of the trusts. As part of its duties, the Agent engaged law firms across the country to file thousands of debt collection law suits on behalf of the trusts. The CFPB’s action arose as a result of the Agent allegedly suing for private student loan debt that it could not prove it owned, or for which the statute of limitations had already expired.
In connection with the lawsuits, the law firms representing the trusts submitted affidavits executed by Agent. The affidavits claimed personal knowledge of the education loan records evidencing the debt, the business records, chain of title records, and chain of assignment records proving the trusts’ ownership of the debt, and the record management practices and procedures of the trusts. Despite this, the CFPB alleged that in many cases the affiants lacked personal knowledge of any and/or all of these items.
Furthermore, the lawsuits were allegedly filed despite the fact that documentation of complete chains of assignments as well as the promissory notes to prove that the debts were owed often did not exist.
The CFPA prohibits any covered person from engaging in unfair, deceptive, or abusive acts or practices. An act or practice is deceptive under the CFPA if it involves a material representation or omission that misleads, or is likely to mislead, a consumer acting reasonably under the circumstances. The CFPB found that the representations made by the Agent were material because they were likely to affect a consumer’s choice or conduct regarding how to respond to a collections lawsuit and were likely to mislead a consumer acting reasonably. Therefore, the representations were deemed deceptive, in violation of the CFPA. The CFPB further found that the Agent’s acts and practices caused or were likely to cause substantial injuries to consumers.
For these reasons, the CFPB issued a consent order against the Agent. The consent order requires an independent audit of more than 800,000 student loans, it prohibits the Agent or its representatives from attempting to collect, reporting negative credit information, or filing lawsuits on any loans that are unverified, and requires the Agent to pay at least $19.1 million for the harm to consumers, relinquished funds to the Treasury, and a civil money penalty.
A copy of the consent order can be found here: http://files.consumerfinance.gov/f/documents/201709_cfpb_transworld-systems_consent-order.pdf.