National Collegiate Student Loan Trusts Student Loan Collection Wisconsin Class Action

This class action concerns collections of student loans. The defendants are the National Collegiate Student Loan Trust and entities with similar names, NCT (a de facto company including other trusts), and Wilmington Trust Company (the trustee for the trusts). The complaint alleges that the Trusts and NCT “did not have the lawful right to collect any sums” from the plaintiff in this case or other student loan borrowers, and “did not have the right to flood the courts with consumer debt collection actions under the color of law, based upon” flawed records.

The defendants in this case originated with a company known as First Marblehead Corporation (FMC), which approached national banks with a proposal for making student loans. According to the complaint, FMC would handle everything pertaining to the loans, from their marketing to their “consummation.” The complaint alleges that FMC wanted to involve the banks to circumvent state regulations, because national banks are not subject to state regulations. The complaint calls this a “a ‘rent a charter’ scheme.”

FMC promised that after the loans were made, the various trusts would buy the loans from the banks, the complaint alleges, and that the loans would be guaranteed by an entity called The Education Resources Institute (TERI), which would pay off loans if borrowers defaulted. This meant that neither FMC nor the trusts would be involved in loan collection.

However, TERI ended up in bankruptcy and could not buy defaulted loans, the complaint alleges, so some other means of dealing with defaulted loans had to be devised.

Some of the defendants in this case—National Collegiate Student Loan Trust, National Collegiate Master Student Loan Trust, and National Collegiate Master Student Loan Trust, I, collectively called “the Trusts” in this case—are entities that the complaint alleges have acquired student loans. Another defendant, NCT, seems to consist of fifteen other trusts treated as a single entity, all originating with FMC and all having the same operations and management, the complaint claims.

The complaint alleges that the Trusts and NCT do not have the right to collect on these loans, that it does not have the information it needs to prove its claims in the courts and that the claims are “based upon records it knew were unreliable, inadequate, and/or infected with inaccurate information.” The complaint alleges that the Trusts and NCT have nevertheless tried to collect on the loans and bring the debtors to court.

The complaint claims, “The supposed debts are based on (i) non-governmental loans (ii) originated for student borrowers … but (iii) not funded for a ‘qualified education loan,’ which is specifically defined” in the United States Code.

The Class for this action is any Wisconsin resident with whom the Trusts or NCT communicated, directly or indirectly through an authorized agent, alleging that a debt was owed. The Subclass is those in the above class who paid the Trusts or NCT, directly or indirectly, any amounts in response to the communication.

Article Type: Lawsuit
Topic: Loans
Tags: Loan-Related Unfair Practices, No Proof of Standing/Ownership of Debt, Student Loans, Unlawful Debt Collection