Showing posts with label National Collegiate Student Loan Trust. Show all posts
Showing posts with label National Collegiate Student Loan Trust. Show all posts

Tuesday, July 25, 2017

National Collegiate Student Loan Trust's student loans may be uncollectible against California co-signers: Sweet!

National Collegiate Student Loan Trust (NCSL)has been in the news lately. The New York Times recently broke a story about NCSL's efforts to collect on the defaulted student loans it holds. According to the Times, NCSL holds $12 billion in private student loans, and more than 40 percent of those loans ($5 billion) is in default.

Squadrons of NCSL attorneys have fanned out across the United States to sue student-loan defaulters, but they have been running into trouble. In case after case, judges have thrown NCSL's collection lawsuits out of court because NCSL can't produce the paperwork to show that it owns the debt.

And now, in California,  NCSL faces another obstacle to its debt-collection efforts. An obscure  California statute may make it impossible for NCSL to collect against co-signers on private student loans taken out in the Golden State.

Section 1799.91 of the California Civil Code requires lenders to provide loan co-signers with a specific written notice that warns them of the risk they take when they co-sign a loan. The warning states:
You are being asked to guarantee this debt. Think carefully before you do. If the borrower doesn't pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.

You may have to pay the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection costs, which increases this amount.
 The creditor can collect this debt from you without first trying to collect from the borrower. The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become part of your credit record.
Importantly, California law requires co-signers to acknowledge receipt of the statutory warning by signing their names below the cautionary message.
National Collegiate Student Loan Trust requires most of its student borrowers to obtain co-signers on their loans; and reportedly, most NCSL loans do not contain the California statutory warning. The combination of missing documents and the California co-signer statute may make it virtually impossible for NCSL to collect on defaulted student loans in California. Moreover, when NCSL borrowers in California find out that their student loans may be uncollectible, it seems inevitable that more of them will default.

Of course no one should encourage a solvent debtor to welsh on a lawful debt. People who took out private loans held by NCSL should pay them back if they have the ability to do so. But the banks made it virtually impossible for destitute private student-loan borrowers to discharge their private college loans in bankruptcy when they lobbied Congress to pass the so-called Bankruptcy Reform Act of 2005. Now, at least, hard pressed student-loan defaulters have some defenses if they get sued by NCSL--particularly in California.

I am grateful to Steve Rhode for alerting me to this important development. Mr. Rhode wrote on this issue in the Get Out of Debt Guy blog site.  I'm also grateful to California attorney Christine Kingston for calling Steve's attention to the California co-signer statute and its significance for student-loan debtors.

 References

Stacy Cowley and Jessica Silver-Greenberg. As Paperwork Goes Missing, Private Student Loan Debts May Be Wiped Away. New York Times, July 17, 2017.

 Steve Rhode. California Student Loan Co-Signer Statute Helps to Kill Student Loan Debt. Get Out of Debt Guy, July 25, 2017.











Friday, April 21, 2017

Recent Navient and National Collegiate Student Loan Bankruptcy Rulings – March 2017: A Must-Read Article by Steve Rhode

If you are overwhelmed by your student loans and thinking about filing for bankruptcy, you should read this essay by Steve Rhode. Mr. Rhode examined recent bankruptcy court adversary proceedings in which student borrowers brought complaints against Navient or National Collegiate Student Loan Trust. As Mr. Rhode relates, debtors often won significant relief in these lawsuits--sometimes through settlement agreements.

Why is Mr. Rhode's article important to you?

First, his article contains links to adversary complaints that were drafted by attorneys. If you file your own adversary complaint against your student-loan creditor, you can use these complaints as templates to file your own complaint.

Second, the proceedings Mr. Rhode examined show various theories under which debtors sought to have their loans discharged. Some of those theories might work for you.

I am frankly surprised that debtors were so successful in the cases Mr. Rhode analyzed. I wonder whether Navient and National Collegiate Student Loan Trust are more amenable to settlement than Educational Credit Management Corporation and the U.S. Department of Education. ECMC and the Department of Education have opposed bankruptcy relief in a multitude of cases, even in cases where it was clear the debtor was desperate. (See for example, Roth v. ECMC and Abney v. U.S. Department of Education.)

Mr. Rhode has presented us with a very useful analysis of recent adversary proceedings against Navient and National Collegiate Student Loan Trust. A trend may be developing toward better bankruptcy outcomes for distressed student-loan debtors. Wouldn't that be a terrific development?




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Out of curiosity I decided to take a look at recent bankruptcy Adversary Proceedings that had closed against Navient and National Collegiate Student Loan Trust. I looked at a number of cases and it appears people who filed their own Adversary Proceeding against their student loan holders had a less favorable outcome. Those people represented by an attorney, fair better.

At the very least, while the debt may not have been completely eliminated there were certainly some very deep discounts in the amount owed. Also the outcomes in all cases is not always apparent.

For example in Medina v. National Collegiate Student Loan Trust there was an apparent settlement agreement that contained a “release of liability. The Adversary Proceeding was then dismissed. – Source

Medina had asserted in his lawyer prepared complaint that his student loans should be discharged because his flight school was a “sham,” the loans were not used for a qualified educational purpose, and the school was not properly certified. These are issues raised over in this article. – Source

In the case Ard-Kelly v Sallie Mae the debtor owed $913,997 in loans. Of those loans all but $250,595 could be included in a $0 monthly Income Contingent Repayment plan. – Source

It appears all but $219,070 was found to be dischargeable in bankruptcy. While $219,070 is still a lot of money, it’s only 24% of the original balance stated. – Source

In Cotter v. Navient, the debtor had filed a Chapter 13 bankruptcy but was said to have still owed about $29,000 in student loan debt. Cotter stated, “Plaintiff incurred this student loan attending a school named ComputerTraining.com. The campus was located at 550 Polaris Parkway Westerville Ohio 43082. The Plaintiff started classes at said school on November 16, 2007 and was able to finish however the education he received was substandard, outdated and useless to him. Furthermore the school promised lifetime job placement assistance along with assistance with interviewing and resumes. The school he attended closed soon after he finished. The school in question is currently part of a class action lawsuit for fraud.” – Source

Following the court action regarding this debt the $29,000 balance was reduced to $2,500 with payments of $35.79 per month at 1% interest. This is about a 92% reduction in the amount owed. The debt will be fully repaid in 72 months. – Source

In Proctor v. Navient the debtor had co-signed for student loans for someone who was not a relative or dependent and said to not be qualified student loans protected in bankruptcy. – Source

The $188,787 balance was reduced to $15,535 at 3% interest and payments of $107.28 per month for 180 months. This is about a 92% reduction in the amount owed. – Source

So as you can see, recent closed bankruptcy Adversary Proceeding cases do result generally in some significant reductions in debt owed.

Steve Rhode
Get Out of Debt Guy
Twitter, G+, Facebook

This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

Tuesday, March 14, 2017

Student Loan Debt Collector accused of violating the Fair Debt Collection Practices Act; Brandon v. Eaton Group Attorneys

Unscrupulous debt collection practices: Economic exploitation of struggling student-loan debtors

Susan Browmmiller, in her classic book on rape, observed that rape victims are often assaulted twice. First, they are physically raped by their attacker; and then they are psychologically raped by the justice system when they testify against the rapist in a brutal and humiliating criminal trial.

Something similar can be said about student-loan debtors. Millions of unsophisticated young people have been enticed to take out student loans to enroll in academic programs that don't lead to good jobs. That's rape number 1.

Then when these duped individuals are unable to pay back their student loans, they fall into the hands of the unscrupulous debt collectors. That's rape number 2.

Brandon v. Eaton Group Attorneys: Law firm accused of violating Fair Debt Collection Practices Act

Last January, a federal judge in Louisiana ruled in a case brought by Cassandra Brandon against Eaton Group Attorneys (Eaton), a law firm representing National Collegiate Student Loan Trust (NCSLT), a student-loan debt collector. Eaton had sued Brandon on NCSLT's behalf, alleging that Brandon had defaulted on her student loans and owed NCSLT about $46,000.

After the lawsuit was filed, an agent for Eaton sent Brandon a letter, which was described as a "REQUEST FOR PAYMENT ARRANGEMENTS." And this is what the letter said:
Dear CASSANDRA PLUMMER [Plummer is Brandon's maiden name]: 
If you would like to explore a voluntary repayment plan, then please provide the requested information. The debt will need to be acknowledged through the attached consent judgment. Please return these forms as soon as possible. This is a communication from a debt collector. This is an attempt to collect a debt. Any information will be used for that purpose.
Accompanying the letter was a partially completed consent judgment, which stated:
IT IS ORDERED, ADJUDGED, AND DECREED that judgment be rendered in favor of Plaintiff, NATIONAL COLLEGIATE LOAN TRUST 2007-1, and against the defendant, CASSANDRA PLUMMER . . ., in the full sum of $41,115.13, together with accrued interest of $4,998.37, and additional interest of 4% from date of judgment, and for all costs of these proceedings, subject to a credit of $0.00.
Brandon then sued Eaton Group Attorneys in federal court, charging the law firm with violating the Fair Debt Collection Practices Act (FDCPA).  Basically, Brandon accused the law firm of sending her a deceptive debt-collection letter in violation of the FDCPA.

Eaton moved for summary judgment on Brandon's claim, arguing that its letter was "non-deceitful as a matter of law." But Judge Sarah Vance denied the law firm's motion and allowed Brandon to proceed with her suit.

Judge Vance began her analysis by summarizing the purpose of the FDCPA, which is to eliminate "abusive, deceptive, and unfair debt collection practices . . ." The law prohibits debt collectors from using any "false, deceptive, or misleading representation or means in connection with the collection of any debt," and it bars debt collectors from using "unfair or unconscionable means" to collect on a debt.

In the court's view;
[The] letter [Brandon] received was misleading because an unsuspecting debtor, seeking only to 'explore a voluntary repayment plan,' could be fooled into executing the consent judgment without knowledge of the consequences. Specifically, an unsophisticated debtor may not know that the consent judgment will serve to waive potentially valid defenses and may facilitate a wage garnishment order" [Emphasis supplied]
By telling Brandon she must formally acknowledge her debt before she could even "explore" voluntary repayment plan, the Eaton Group Attorneys was basically inviting her to "inadvertently dig herself into a deeper hole." (Internal citation omitted).

Congress needs to clean up the student-loan debt collection industry

Laws are already on the books that ban unfair debt collection activities. Brandon sued Eaton Group Attorneys under the FDCPA; and Navient Solutions and Student Assistance Corporation had a judgment assessed against them last spring for violating the Telephone Consumer Protection Act.


But more needs to be done.

Specifically, Congress needs to hold hearings on the activities of the student loan guaranty agencies--and Educational Credit Management Corporation in particular. A Texas bankruptcy judge slapped ECMC with punitive damages last year for repeatedly violating the automatic stay provision of the Bankruptcy Code, but the penalty was entirely too light for such a wealthy corporation.

And Congress needs to eliminate the excessive penalties--25 percent or more--that debt collectors assess on student-loan debtors in default.  After all, it is the penalties and accrued interest that are driving millions of struggling student-loan debtors into 20- and 25-year income driven repayment plans.

Republicans and Democrats could bring relief to millions of overwhelmed student-loan debtors if they just joined together to pass meaningful reform legislation.  If our nation's politicians can't cooperate in a bipartisan effort to clean up the student loan program, then shame on all of them.

References

Brandon v. Eaton Group Attorneys, CA No. 16-13747 (E.D. La. Jan. 24, 2017).

Bruner-Halteman v. Educational Credit Management Corporation, Case No. 12-324-HDH-13, ADV. No. 14-03041 (Bankr. N.D. Tex. 2016).

McCaskill v. Navient Solutions, Inc., No. 8:15-cv-1559-T-33TBM (M.D. Fla. April 6, 2016).

Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016. Accessible at https://tcf.org/content/report/student-loan-guaranty-agencies-lost-way/

Wednesday, October 26, 2016

Sued Because You Defaulted On a Private Student Loan? Read Richard Gaudreau's blog in Huffington Post about National Collegiate Student Loan Trust

If you defaulted on a private student loan and got sued, you should read Richard Gaudreau's recent blog essay in the Huffington Post.

As Gaudreau explained, there are big differences between federal student loans and private loans. The federal student-loan program offers alternative repayment plans that lower monthly payments for borrowers who run into financial trouble.  In addition, the Department of Education offers loan forgiveness for people who borrowed to attend an institution that closed while they were enrolled and for people who were defrauded by the institution they attended.

Private student loans offer none of these protections, and private creditors have responded heartlessly toward their defaulted student-loan debtors. In many instances, private lenders have turned over their defaulted student loans to collection agencies. In particular, National Collegiate Student Loan Trust (NCT), a debt collector with a deceptively benign name, has filed law suits against numerous student-loan debtors, as many as one a day in some states, according to a Bloomberg Business Week article.

In some cases, however, NCT has not been able to show that it is the real party in interest in those lawsuits. In other words, NCT cannot always produce the paperwork that demonstrates it has the authority to collect the loan.

In such cases, some debtors have been able to persuade judges to dismiss these collection suits. So if you have been sued because you defaulted on a private student loan, your lawyer should demand that the debt collect produce evidence that it has the right to sue you for your student-loan debt.

Why would a debt collector sue someone without being  able to show it has the authority to collect on the debt? I am not certain, but here is my best guess. I think private banks and lenders (Wells Fargo, Sallie Mae and some other prominent names) have bundled thousands of basically noncollectable student loans and sold them to debt collectors like NCT, without providing the debt buyers with all the necessary legal documents for the individual loans. The debt collectors may have bought these loans for pennies on the dollar.

The debt collectors then sue distressed borrowers, betting the borrower are too unsophisticated to know how to find out whether the debt collector has the legal authority to collect the debt. .

In most instances, it is a safe bet. Distressed student-loan debtors usually do not have enough money to hire lawyers to defend their interests. In some cases, they naively admit to damaging "Requests for Admissions" that the creditors send them in the mail. By doing so, debtors give up their legal rights without knowing it.

In essence, private student-loan debt collectors maybe engaging in the contemporary equivalent of the "robo-signing" scandal that occurred during the home-mortgage crisis of 2008. A lot of home owners lost their homes in foreclosure actions even though the agencies that confiscated their houses sometimes couldn't prove they had the legal authority to sue the homeowner in the first place.

So if you have been sued by NCT or another student-loan debt collector, read Gaudreau's article and then hire a lawyer. The first thing your attorney will probably do is demand that the debt collector produce the evidence that is has the authority to sue you. If it can't produce that evidence, it shouldn't have sued you, and you have a good chance of getting your case dismissed.

Justice! Wouldn't it be nice to see a little of it come your way?


References

Richard Gaudreau. In Spate of National Collegiate Student Loan Trust Lawsuits One Defense Stands Out. Huffington Post, April 25, 2016.  Available at http://www.bloomberg.com/news/articles/2015-06-04/the-student-debt-collection-mess

Jamie P. Hopkins & Katherine A. Pustizzi. A Blast From the Past: Are the Robo-Signing Issues That Plagued the Mortgage Crisis Set to Engulf the Student Loan Industry? 45 University of Toledo Law Review 239 (Winter 2014). Available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2413848

Natalie Kitroeff. The Lawsuit Machine Going After Student Debtors: "This is robosigning 2.0". BloombergBusinessweek.com, June 3, 2015. Available at
http://www.bloomberg.com/news/articles/2015-06-04/the-student-debt-collection-mess

Gloria J. Liddell & Pearson Liddell, Jr. Robo Signers: The Legal Quagmire of Invalid Residential Foreclosure Proceedings and the Resultant Potential Impact on Stakeholders. 16 Chapman Law Review 367 (Winter 2013).