National Collegiate Student Loan Trust (NCSLT), a frequent student loan lender is attempting to collect student loan debt by filing thousands of lawsuits against debtors. However, there is one big problem with these law suits; the NCSLT consistently fails to include adequate facts in their pleadings. Unfortunately, NCSLT have won numerous lawsuits because debtors often fail to challenge the suit which results in a default judgment in NCSLT’s favor. The problem with NCSLT’s pleadings is connected to their relationship to the debtors.
Students typically borrow money from banks to pay for tuition and expenses related to higher education. These banks then sell the loans to financial companies. One of these financial companies included First Marblehead. After buying student loans from the original lenders, First Marblehead set up more than two dozen trusts, also known as NCSLT, and transferred batches of student loans to these trusts. These trusts then sell bonds to investors, and these bonds are backed by student loans. All of this is why NCSLT is the plaintiff in these lawsuits and not the banks students originally borrowed from.
Although many default judgments have been entered in NCSLT’s favor most often by firms such as Forster and Garbus and Rubin and Rothman, debtors are now challenging these suits, and they are winning, often times with little difficulty. It is now being found that NCSLT are violating some debt-collection laws by not following simple rules regarding their pleadings. For example, a trust violated the debt-collection laws in California when it failed to identify the original lender. Problems for the trusts have also arisen when they fail to assert that they own the loans they are attempting to collect.
NCSLT has now filed more than 4,000 lawsuits in five different states. Originally, they were coasting to judgments in their favor, but some debtors are now challenging and winning these suits on basic grounds such as standing as well as gaining enough leverage to obtain a settlement which saves consumers 40-70% off of the balance.