New York Attorney General Opens Inquiry Into Student Loan Collection
July 20, 2017
As published by The New York Times, on July 19, 2017.
The New York attorney general, Eric T. Schneiderman, has opened an investigation into the collection practices of the National Collegiate Student Loan Trusts, one of the nation’s largest owners of private student loan debt, according to Mr. Schneiderman’s office.
The attorney general’s office sent subpoenas on Wednesday asking for information on every collection lawsuit filed by National Collegiate’s trusts against New York residents.
National Collegiate’s trusts have aggressively pursued in court borrowers who fall behind on their student loan payments. An article this week in The New York Times drew attention to the trusts’ inability in many of those lawsuits to produce the paperwork needed to prove that the trusts own the debts they seek to collect. Judges around the country have dismissed dozens of cases filed by National Collegiate’s trusts because of flawed or missing paperwork.
The 800,000 private student loans that National Collegiate owns, totaling more than $12 billion, were originated a decade or more ago by other lenders, then packaged into securities and sold to investors. As the debt changed hands, crucial paperwork documenting the loans’ ownership appears to have been lost, according to court filings in a bitter legal fight among parties involved in operating the trusts.
“I won’t allow a generation of New Yorkers to get victimized by the very system that was created to help them get ahead,” Mr. Schneiderman said in a written statement. The Times’s news story is “deeply concerning” he said, but it is “unfortunately consistent with the increasingly cynical and freewheeling culture we’ve seen take hold across the student loan industry.”
He added, “We will conduct a full investigation and will hold the perpetrators of any fraud against our students accountable.”
A search of state court records indicates that National Collegiate’s trusts have filed at least 600 lawsuits in New York in recent years. Because most debt collection lawsuits are filed in local and county courts, where records are difficult to search, the actual tally is likely to be far larger.
Mr. Schneiderman’s office is seeking documents that would establish the trusts’ right to collect on the debts being pursued. The attorney general has asked for detailed records on the student loans’ chain of title and on the documentation that accompanied every ownership change.
Mr. Schneiderman’s subpoenas went out to both National Collegiate and to Transworld Systems, the debt collection company that hired the law firms that have initiated most of the trusts’ lawsuits against borrowers.
Transworld did not respond to requests for comment.
Donald Uderitz, the beneficial owner of National Collegiate’s trusts, said he had just received the subpoena and had not yet reviewed it.
“Right now, all I can say is given the issues we know we are dealing with, I’m not surprised and I don’t expect this to be the last state attorney general to look into this,” Mr. Uderitz said by email.
Mr. Uderitz has said that he has concerns about the trusts’ ownership paperwork and wants the lawsuits against borrowers to stop until he can more thoroughly investigate the collection problems. A continuing legal dispute between his company, the Vantage Capital Group, and others involved in the trusts has prevented him from making any changes to the trusts’ operations, he has said.