The Consumer Financial Protection Bureau yesterday announced an enforcement action against the National Collegiate Student Loan Trusts (NCSLT) and Pennsylvania Higher Education Assistance Agency (PHEAA) over a series of servicing failures, including mishandling borrower requests during the COVID-19 pandemic. The two entities will pay more than $5 million in fines and restitution to consumers.
The NCSLT, a collection of 15 securitization trusts, and PHEAA, a student loan servicer, were accused of failing to adequately respond to borrowers seeking relief from student loan payments. This included co-signer release requests, forbearance, deferment extensions, loan settlements, forgiveness, and servicemember relief benefits. The CFPB alleges that this misconduct started in 2015 and continued until 2021, affecting thousands of borrowers.
“The CFPB has taken action against a web of investment trusts that failed student loan borrowers, including at the height of the pandemic,” said CFPB Director Rohit Chopra. “Our law enforcement action makes clear that investors cannot sidestep accountability by playing games of corporate musical chairs.”
This marks the second enforcement action by the CFPB against the NCSLT. Previously, the bureau accused the trusts of pursuing improper debt collection lawsuits on private student loans, which the trusts either couldn’t prove or had passed the statute of limitations for litigation.
The proposed stipulated final judgments filed by the CFPB would impose penalties of $400,000 on NCSLT and $1.75 million on PHEAA, to be paid to the CFPB’s victims relief fund. Additionally, they will provide almost $3 million in redress to affected borrowers. These funds will help repay the borrowers who faced delays in responses to their exception requests and other requests for relief.
Further actions include requiring NCSLT and PHEAA to correct outstanding requests, grant co-signer release requests, provide relief to servicemembers, and correct credit reporting errors. The organizations are also required to waive late fees for those who should have received forbearance and other relief.
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