Recently, National Collegiate Trust filed a massive number of lawsuits against borrowers across the United States. States where these lawsuits have been filed include Florida, New York, Michigan, Pennsylvania, New Hampshire, and California. In Missouri, National Collegiate Trust has filed 1,441 civil cases in the state courts since 2011. Similarly, 349 cases were filed in Connecticut and 571 cases were filed in Indiana since 2011.
National Collegiate Trust was created by First Marblehead Bank. This entity files student loan lawsuits against private student loan borrowers. The company is a Delaware trust where private student loan companies pool thousands of loans for hedging purposes. Additionally, it purchases delinquent debt for less than is owed on the account. Many banks and other private student loan lenders sell private student loans shortly after the loans are generated. In this recent instance, Marblehead processed 375,000 loan applications for $1.03 billion in the first quarter of 2005. National Collegiate Trusts often disputes its status as a debt collector. However, because it purchases delinquent debts for the purpose of collecting such debts, the trust qualifies as a “debt collector” pursuant to the Fair Debt Collection Practices.
Many students attending college today have at least one student loan. The United States Department of Education administers many of these student loans but students are turning to private student loans because of limited federal funding available. Private student loans fall within the same category of protection as federal student loans. Private lenders are not required to offer reasonable repayment plans to financially troubled borrowers and can refuse to work with people to manage their payments. According to a Consumer Financial Protection Bureau report, the National Consumer Law Center stated, “[W]e have not encountered any private student lender with a rehabilitation program or any other program to allow borrowers to get out of default and back into repayment.”
Student loans are also similar to other forms of consumer debts, such as credit card or medical debt. Debt collectors who file lawsuits to collect private student loans must abide by the same rules as other delinquent debt collection companies. For National Collegiate Trust to collect on a debt owed, it must prove that it owns the account and the assignment or purchase agreement of the debt must pre-date the lawsuit. If the company cannot produce such proof, the lawsuit may be dismissed for lack of standing.