Embattled Private Student Lenders Finally Cease Abusive Lawsuits During the Coronavirus Pandemic
Decision to Halt Lawsuits Follows SBPC’s Calls for Action, Scrutiny of Industry Debt Collection Tactics
April 3, 2020 | WASHINGTON, DC— Several of the largest private student loan creditors announced they will halt all collections lawsuits after weeks of dragging distressed borrowers to court during the coronavirus national public health crisis. These announcements come on the heels of work by the Student Borrower Protection Center to call attention to these abusive lawsuits and to pressure industry to halt collections.
“In the midst of this pandemic, it is appalling that the private student loan industry continued to threaten litigation and file lawsuits against borrowers in distress,” said SBPC Executive Director Seth Frotman. “It is long past time for the entire private student loan industry to shut down its debt collection machine for the duration of the crisis and be held accountable for their unconscionable actions — they shouldn’t have to be shamed into doing the right thing.”
Navient and Transworld Systems, which conducts collections on behalf of the National Collegiate Student Loan Trusts, stated in media reports today that they would cease debt collection litigation for the duration of the coronavirus pandemic. Navient is the largest private-sector creditor in the student loan market, holding more than $22 billion in outstanding private student loan debt. The National Collegiate Student Loan Trusts were created by some of the biggest banks to hold more than 800,000 private student loans made more than a decade ago. These trusts are notorious for aggressive, predatory collections tactics, including dragging borrowers to court for debts they may not owe.
In addition, earlier this week, private student lender Iowa Student Loan also notified Iowa Attorney General Tom Miller that it had “directed legal counsel to cease filing new Lawsuits” and “retroactively dismiss any suits filed after the [Coronavirus National Emergency declaration] was issued.” A copy of the letter from Iowa Student Loan CEO Steven W. McCullough to Iowa Attorney General Tom Miller is available here:
Yesterday’s announcement by some of the largest creditors in the private student loan market follows a campaign by SBPC to call attention to abusive industry lawsuits filed against distressed borrowers who owe private student loans.
Despite the declaration of a National Emergency on March 13th, these lawsuits have persisted in courtrooms across the country. SBPC attorneys uncovered dozens of lawsuits filed in courtrooms across the country in recent weeks, including at least 18 cases brought by Iowa Student Loans in Iowa, and nearly two dozen cases brought by Navient and by the National Collegiate Student Loan Trusts in New York State.
Earlier this year, SBPC issued a report investigating allegations of robo-signing and other abuses of the courts by private student lenders. Because of these predatory practices, hundreds of thousands of student loan borrowers who have defaulted on private student loans, including those who have been the target of lawsuits, are being forced to hand over money they may not owe.
Last week SBPC and Americans for Financial Reform sent letters to a dozen of the largest private student lenders calling on the companies to halt debt collection lawsuits for the duration of the coronavirus pandemic.
About the Student Borrower Protection Center (SBPC):
The Student Borrower Protection Center (www.protectborrowers.org) is a nonprofit organization focused on alleviating the burden of student debt for millions of Americans. SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students. Led by the team of former federal regulators that directed oversight of the student loan market at the Consumer Financial Protection Bureau, SBPC exposes harmful and illegal practices in the student loan industry, drives impact litigation, advocates on behalf of student loan borrowers in Washington and in state capitals, and promotes progressive policy change. SBPC accomplishes these goals by partnering with leaders at all levels of government and throughout the nonprofit sector.