Assembly Line Student Loan Debt Collections Called Into Question

Student loan debt collection lawsuits crowd local courtrooms across the country. But when mega-firms use assembly line tactics to push cases into court, mistakes happen. That can leave well-meaning borrowers at a loss to fight back against claims they don’t even owe. Now the Consumer Financial Protection Bureau has stepped in, but a settlement designed to protect consumers could fall apart in court.

The average college student graduates with over $30,000 in student loan debt. For many families, student loan payments are some of the largest bills every month, second only to a mortgage. When finances get tight, many borrowers have no choice but to go into default and risk harassment from debt collections companies.

Across the country, Americans owe nearly $1.5 trillion in student loan debt. Most of that debt is backed by the federal government. When a borrower defaults, the law allows the government to garnish their wages or seize tax refunds directly to get the debt paid. But when students borrow from private lenders, like the banks and lenders that work with National Collegiate, those defaults head to court for collections lawsuits. 

Student Loan Defaults Lead to Assembly Line Lawsuits

The high number of student loan debt collections lawsuits leads large law firms like Transworld to streamline their processes to collect on as many debts as possible. The New York Times reports that Transworld paralegals and support staff crank out thousands of student loan debt collections lawsuits every year. Employees review more than 30 or 40 files every day, and that leads to errors.

In September 2017, the Consumer Financial Protection Bureau (CFPB) filed complaints against National Collegiate and Transworld, saying their sloppy and illegal collections methods were hurting American borrowers. Defendants in student loan suits have been sued twice for the same debt by two different creditors, brought to court for loans they paid off years before, or even sued for debts so old they couldn’t be collected. 

Even without those errors, many of Transworld’s 38,000 lawsuits were missing the proof needed to complete the case. Many debt collections lawsuits require an affidavit – a sworn statement – establishing that the debt exists and the amount owed on it. Transworld uses software to automatically complete these affidavits, which are then signed by low-level employees with no legal training. The problem is that these employees don’t know what happened in the creditor’s business, or how the amount was calculated. Still, these “affiants” signed saying they had “personal knowledge of the business records” supporting the lawsuits, often because they would be fired if they refused.

CFPB Student Debt Collections Settlement Comes Under Fire

The complaints the CFPB filed against National Collegiate and Transworld were quickly settled. Under the settlement agreement, National Collegiate would be prohibited from collecting on student debt collection judgments it had already won or bring any new cases until it finished auditing all its 800,000 loans. But seven companies involved in collecting on National Collegiate debts are objecting to the settlement. They have filed pleadings with the United States District Court of Delaware asking the judge to refuse to commit the resolution to a judgment. Until the judge renders a decision, the student loan debt collection lawyers are free to keep filing new lawsuits and collecting on their judgments.

Defending Against Abusive Student Loan Debt Collection Lawsuits

In the meantime, consumers facing student loan debt collection lawsuits should be ready to fight the companies’ efforts to collect on questionable debts. By hiring a collections harassment attorney, borrowers can ensure that the lawsuits are fair, including being filed by and against the right person. A debt defense lawyer can help ensure the amounts owed are correct, and can often negotiate payment terms you can afford. Sometimes, a skilled attorney can even get a case dismissed when the collections company doesn’t have the documents to prove their case. Don’t go up against student loan debt collectors alone. Get an experienced collections harassment attorney on your side and fight back against assembly line lawsuits and illegal collections practices.

Dani K. Liblang is a collections harassment attorney at The Liblang Law Firm, PC, in Birmingham, Michigan. She has over 35 years’ experience fighting back against collections companies. If you are facing a student loan debt collections lawsuit, contact The Liblang Law Firm, PC, for a free consultation.