National Collegiate Trust isn’t a single entity, but a network of trusts located all over the country. There is, perhaps, no financial system as complicated as the student loan industry, as every loan eventually changes hands several times, often ending up in the hands of one of the many National Collegiate Trusts. When someone is sued by a National Collegiate Trust, it’s because that person, at one time, borrowed or cosigned on a private student loan. These aren’t the Stafford loans and similar borrowing instruments available through the Department of Education. These are private loans that are used as investment vehicles for interested parties. As such, it’s usually impossible for someone to know who holds their loan and where, which only makes it more confusing when sued by a National Collegiate Trust.
What is a National Collegiate Trust?
Once a student has maxed out on public student loans like Stafford loans, they may require private loans to cover the rest of tuition, fees and other college-related expenses. Major financial institutions are usually responsible for providing the money for those loans. That includes major banks like Chase Bank and Bank of America. These are the originators of the loans. Once originated, the loan passes through the hands of a depositor and eventually ends up with a National Collegiate Trust. The trust does not lend money nor does it service the loan – or take payments for it, in other words. The only function of the National Collegiate Trust is to hold onto thousands of these private student loans and use them as fuel for private investors. As long as most students remain in good standing with their loans, each trust represents a sound investment. In recent years, though, as more and more people have had trouble paying those loans back, National Collegiate Trust and its hired collection agencies have taken aggressive steps to recouping on their investment.
This has led to some untoward tactics on the part of some National Collegiate Trusts. In 2017, the Consumer Financial Protection Bureau, or CFPB, forced several Delaware National Collegiate Trusts, along with Transworld Systems, their collection agency, to pay more than $20 million in restitution and penalties for illegal collection attempts. Specifically, this is what the CFPB found:
- Sued account holders for debts that they could not prove – With thousands of student loans under their purview, it’s only inevitable that some information would fail to pass to the National Collegiate Trust. However, without that information, the debt collector cannot attempt litigation. According to the complaint filed against the National Collegiate Trusts, more than 2,000 lawsuits involved a lack of necessary information, including instances where there was no signed document from the account holder, promising to pay the loan back.
- Produced misleading and false affidavits – This is an emerging defense for consumers targeted by mass debt collectors and scavengers. Before a collector can sue someone for debt, they must file an affidavit signed by a witness that has comprehensive knowledge of the account. According to the complaint, National Collegiate Trusts and Transworld Systems filed affidavits that involved witnesses that did not have the requisite knowledge of the account.
- Improper notarization procedures – In addition to deceitful affidavits, the CFPB also confirmed that many of those affidavits were also improperly notarized. Specifically, the offending affidavits were not signed in the presence of the notary.
- Violated the statute of limitations – The complaint also involved close to 500 instances of National Collegiate Trusts and Transworld Systems suing consumers even though the statute of limitations had expired on their debt. Once an account slips outside of the statute of limitations period (which runs between three and six years, in most cases), it is no longer legally eligible for a lawsuit. However, most people are not aware of the statute of limitations regarding their accounts, and debt collectors often attempt to take advantage of this lack of knowledge.
What should be clear from the CFPB’s case against National Collegiate Trusts and Transworld Systems is that they can’t be trusted to pursue lawsuits in an ethical, honest fashion. With thousands of individual offenses included in the complaint, this isn’t an example of a debt collector making a simple mistake. It’s an example of a collector taking every measure necessary, including illegal ones, to get people to pay them. And because it is such a profitable venture, the penalty will likely serve as minimal deterrent from attempting such lawsuits again.
What should I do if I am sued by a National Collegiate Trust?
National Collegiate Trusts have already demonstrated their willingness to resort to unfair, and illegal, measures in pursuing debt through their collectors. This means that if facing a lawsuit from a National Collegiate Trust, waste no time in building a defense. Answer the suit so that it doesn’t result in a default judgment and consult with a debt defense attorney about what to do next. If there are any doubts about the debt’s legitimacy, then make the National Collegiate Trust prove the information is there and that the statute of limitations hasn’t passed. An attorney can help with checking the veracity of the affidavit as well, ensuring no stone goes unturned.
Debt collectors like those employed by National Collegiate Trusts have proven that they will pull out all the stops in getting consumers to bend. Prove to them that the best offense is a better defense.