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Student Loan Collection Trusts Under Scrutiny

If you have fallen behind on private student loan payments and have been sued by an entity called the National Collegiate Students Loan Trust, there could be some good news for you.
The New York Times recently reported that the National Collegiate Student Loans Trust has had trouble proving in various court cases that it has the legal paperwork showing ownership of the loans they are trying to collect. As a result, judges in various states around the country have dismissed dozens of lawsuits against former students, basically forgiving their debts.
One of the largest owners of private student loans, National Collegiate is an umbrella name for 15 trusts that hold 800,000 private student loans, totaling $12 billion. The New York Times’ investigation found that more than $5 billion of that debt is in default.
Without the proper paperwork to prove ownership of the loan, such as the actual promissory note, or a proper chain of title, consumer advocates say that National Collegiate cannot legally enforce payment of the note.
Something that National Collegiate has not lost is its penchant to sue former students who have defaulted on their loans. In Missouri alone, it has filed approximately 2,712 actions against former students since 2011. More than 500 were filed just in 2016.
But unless they had the proper paperwork, National Collegiate had no legal right to file those suits. And those students would be allowed to file claims of their own under the Missouri Merchandising Practices Act, the state law that prohibits deceptive and unfair business practices.
“These people may be able to recover payments made to National Collegiate,” said Colin W. McClain, an attorney for the law firm of Humphrey, Farrington & McClain in Independence, Missouri. “The court could vacate judgments that require them to pay. And they could wipe out all of the remaining debt owed on their student loan and award any punitive damages for National Collegiate’s willful and wanton conduct.”
Many of the loans that National Collegiate holds were made to college students more than a decade ago by dozens of different banks, then bundled together by a financing company and sold to investors through a process known as securitization.
But as the debt passed through so many hands, critical paperwork documenting the loans’ ownership disappeared, according to court documents that The New York Times reviewed.
Attorneys at Humphrey, Farrington & McClain have experience with Missouri Merchandising Practices Act claims and consumer protection law. If you have been sued by National Collegiate Student Loans Trust or you make payments to them, please call the firm at (888) 353-0491 or (816) 836-5050.
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