NCT (National Collegiate Trusts) is a frequent
subject of my student loan blog posts.
What Is NCT again?
NCT is a company, well, 15 separate trusts, that buy (allegedly) private student loans from banks, packages them into trusts
that, well, let me quote from the Bloomberg news site article by Shahien Nasiripour:
The trusts, created more than a decade ago, cumulatively have held well over 874,000 loans made to more than 812,000 people who borrowed money from banks mostly to pay for their higher education, according to filings with the U.S. Securities and Exchange Commission and monthly reports to investors. Those banks sold the loans to a middleman who created the trusts, and the trusts then sold notes promising certain returns to investors ranging from the hedge-fund manager Waterfall Asset Management LLC to the Bill & Melinda Gates Foundation. Monthly payments to investors are backed by borrowers’ monthly payments on their student loans.
Why Is NCT In Trouble?
Because they cannot prove in court that they own the private student loans on which they are suing.
It is a default judgment business model, they sue betting that you, the consumer-borrower, will not answer.
Then they get a judgment and garnish wages and whatever other forms of execution on a judgment that your state allows.
I have lost some cases defending NCT suits, with judges who accepted their insufficient paperwork.
And some have been dismissed, and some settled for less than half the amount sought in the NCT lawsuit.
As the article puts it:
Consumer lawyers say borrowers generally don’t show up in court, leading to default judgments against them that could eventually lead to wage garnishment. But the lawsuits haven’t led to big recoveries for investors. And in recent years, a number of judges around the U.S. have dismissed the trusts’ lawsuits against borrowers or else ruled against their debt collectors, citing sloppy paperwork.
What Is The Government Doing About NCT?
The CPFB (Consumer Protection Finance Bureau) has been investigating, and the article says there is a tentative settlement.
If it requires NCT to prove it owns a loan before trying to collect from the student loan borrower, or co-signer, that would put them out of business, from what I have seen.
What will the settlement do?
If finalized, it would require the payment of “large sums” in restitution to borrowers and civil penalties to the U.S. government, according to a summary of the proposal filed in a separate court case.