In a significant shift, the Trump administration has voluntarily dismissed a federal lawsuit against National Collegiate Student Loan Trusts, abandoning a proposed $2.25 million settlement that could have benefited student loan borrowers.
Background of the dismissed lawsuit
The Consumer Financial Protection Bureau (CFPB) filed the lawsuit in 2017, targeting 15 “securitization trusts organized under Delaware law that acquire, pool, and securitize student loans, which they then service.”
The lawsuit alleged the trusts had engaged in several improper debt collection practices, including:
- Filing lawsuits against private student loan borrowers without proper documentation
- Attempting to collect debts they couldn’t prove were actually owed
- Pursuing collection activities after the statute of limitations had expired
Had the lawsuit proceeded, the proposed $2.25 million settlement would have provided financial relief to borrowers subjected to these allegedly improper practices.
Part of a broader pattern
This dismissal appears to be part of a larger trend. In February, the CFPB also withdrew its lawsuit against the Pennsylvania Higher Education Assistance Agency, which accused the servicer of illegally collecting on student debts already discharged through bankruptcy and reporting inaccurate information to credit bureaus.
These actions align with the current administration’s efforts to reduce the CFPB’s scope and authority. The administration also recently attempted to drastically cut the bureau’s workforce by terminating as many as 1,500 of its approximately 1,700 employees, though a judge has temporarily blocked this reduction.
Implications for student borrowers
The dismissal of these lawsuits creates significant concerns for consumer protection in the student loan industry. Without such regulatory oversight, borrowers may face greater challenges when confronting potentially improper debt collection practices.
When the government drops legal actions against alleged bad actors, it eliminates potential financial redress for consumers who may have been harmed. The abandoned settlement could have compensated borrowers who allegedly experienced improper collection tactics.
The CFPB, White House, Pennsylvania Higher Education Agency, and counsel for National Collegiate Student Loan Trusts have all declined to comment on these developments. This silence leaves many questions about the reasoning behind these dismissals and what they signal for future consumer protection efforts.
For borrowers currently dealing with National Collegiate Student Loan Trusts or similar entities, these changes suggest a regulatory environment with fewer safeguards against questionable collection practices.
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