One of the nation’s largest holders of private student-loan debt must refund millions of dollars to borrowers and temporarily stop many of its collection activities, under a settlement with federal regulators announced on Monday.
The creditor, the National Collegiate Student Loan Trusts, holds $12 billion in student loans that were originally made by banks. In Monday’s settlement with the Consumer Financial Protection Bureau, the trusts agreed to pay nearly $19 million in penalties and borrower refunds — and could be on the hook for millions in additional payments and forgiven loans. A debt collector that National Collegiate hired, Transworld Systems, will pay an additional $2.5 million.
The trusts “sued consumers for student loans they couldn’t prove were owed and filed false and misleading affidavits in courts across the country,” said Richard Cordray, the consumer bureau’s director.
