The Consumer Financial Protection Bureau is under constant threat from Republicans, but it just keeps doing its job, helping people who’ve been screwed by the financial industry. This week, the CFPB reached a proposed settlement with an abusive owner of billions in student debt. If a federal judge signs off on the settlement:
The creditor, the National Collegiate Student Loan Trusts, holds $12 billion in student loans that were originally made by banks.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.
That’s not a ton of money when you consider the amount of debt National Collegiate Student Loan Trusts holds, but the settlement doesn’t end there:
... the National Collegiate Student Loan Trusts must audit their book of more than $8 billion of loans, many of them in default, to prove they can document that they own each loan and that it's not too old to collect. Until it is complete, investors who own the bonds that contain those loans won’t receive any cash from borrowers, even those making steady payments. Instead, the money will go into an escrow account. [...]
According to the CFPB, [lawsuits] it examined were rife with irregularities: Some were filed well past the statute of limitations, others lacked paperwork establishing that the listed creditor actually had a right to collect, and many contained misleading statements. Debt collectors trying to process them, according to the bureau, were so inundated with paperwork that they had interns and mailroom clerks sign critical documents.
Interns and clerks signing documents? Lawsuits filed past the statute of limitations? Lawsuits that may have been filed to collect debts the filer couldn’t prove it owned? It’s like these people looked at the subprime mortgage crisis and thought “Yes! That’s what we want to accomplish!”
We won’t know the outcome of the audit—assuming a judge approves it and it happens—for quite a while, but in the meantime, “borrowers who had been forced to repay with wage garnishments or levies against their bank accounts would now get a temporary reprieve.” The end result of the audit could be the discovery that some people’s loans can’t be collected on at all.
This—the government stepping in to stop the worst corporate abuses—is what we got from the Obama presidency. It’s what Republicans are working hard to undo.