National Collegiate Student Loan Trusts
Documents in this case
- Complaint · · 16 p.
- Consent order · · 40 p.
- Amended complaint · · 22 p.
- Opinion · · 39 p.
- Stipulation · · 16 p.
- Stipulation · · 2 p.
Case summary
On September 18, 2017, the Bureau filed a complaint and proposed consent judgment against the National Collegiate Student Loan Trusts (Trusts). The Bureau’s complaint, amended in April 2021, alleged that the Trusts engaged in deceptive and unfair acts and practices in violation of the Consumer Financial Protection Act of 2010. Several entities intervened to object to the proposed consent judgment, and on May 31, 2020, the court denied the Bureau’s motion to approve the proposed consent judgment.
On December 13, 2021, the court denied defendants’ motion to dismiss the Bureau’s amended complaint, and on February 11, 2022, the court certified two holdings in its opinion for interlocutory appeal to the Third Circuit. The Third Circuit granted the petition to appeal, and issued an opinion on March 19, 2024. On January 16, 2025, the Bureau filed a proposed stipulated final judgment. On February 18, 2025, third parties objected to the proposed settlement.
On April 25, 2025, the parties filed a joint stipulation voluntarily dismissing the action against all defendants with prejudice, and the court terminated the case on April 29, 2025.
Complaint ()
PDF of this document (16 pages)
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
CONSUMER FINANCIAL PROTECTION BUREAU
Plaintiff,
v.
THE NATIONAL COLLEGIATE MASTER STUDENT LOAN TRUST; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2003-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2004-1;
NATIONAL COLLEGIATE STUDENT LOAN TRUST 2004-2; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-2;
NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-3; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-2;
NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-3; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-4; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-1;
NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-2; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-3; and NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-4, Delaware Statutory Trusts,
Defendants.
Case No. ______________
COMPLAINT FOR PERMANENT INJUNCTION AND OTHER RELIEF
INTRODUCTION 1.
Plaintiff, the Consumer Financial Protection Bureau (“Bureau”), brings Case 1:17-cv-01323-UNA Document 1 Filed 09/18/17 Page 1 of 16 PageID #: 1
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this action against the fifteen (15) National Collegiate Student Loan Trusts (“Defendants,” or “NCSLTs”, or “the Trusts”) under sections 1031(a), 1036(a), and 1054(a) of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5531, 5536(a), 5564(a), to obtain permanent injunctive relief, restitution, refunds, disgorgement, damages, civil money penalties, and other appropriate relief for Defendants’ violations of Federal consumer financial law in connection with Defendants’ servicing and collection of private student loan debt. 2.
The Bureau has reviewed the debt collection and litigation practices of the fifteen (15) Delaware statutory trusts referred to as the National Collegiate Student Loan Trusts, which are the National Collegiate Master Student Loan Trust, NCSLT 2003-1, NCSLT 2004-1, NCSLT 2004-2, NCSLT 2005-1, NCSLT 2005-2, NCSLT 2005-3, NCSLT 2006-1, NCSLT 2006-2, NCSLT 2006-3, NCSLT 2006-4, NCSLT 2007-1, NCSLT 2007- 2, NCSLT 2007-3, and NCSLT 2007-4), as performed by Defendants’ Servicers and Subservicers (as defined below) pursuant to the various servicing agreements between Defendants and each such Servicer or agreements between a Servicer and a Subservicer. 3.
To collect on defaulted private student loans, Defendants’ Servicers filed collections lawsuits on behalf of Defendants in state courts across the country. In support of these lawsuits, Subservicers on behalf of Defendants executed and filed affidavits that falsely claimed personal knowledge of the account records and the consumer’s debt and, in many cases, personal knowledge of the chain of assignments establishing ownership of the loans. In addition, Defendants’ Servicers on behalf of Defendants filed at least 2,000 collections lawsuits without the documentation necessary to prove Trust ownership of the loans or on debt that was time-barred. Finally, notaries for Defendants’ Servicers notarized more than 25,000 affidavits even Case 1:17-cv-01323-UNA Document 1 Filed 09/18/17 Page 2 of 16 PageID #: 2
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though they did not witness the affiants’ signatures. JURISDICTION AND VENUE 4.
The Court has subject-matter jurisdiction over this action because it is brought under Federal consumer financial law, 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345.
5.
Venue is proper in this District because Defendants are located and do business in this District. 12 U.S.C. § 5564(f). PLAINTIFF 6.
The Bureau is an independent agency of the United States charged with regulating the offering and provision of consumer financial products or services under Federal consumer financial laws. 12 U.S.C. § 5491(a). The Bureau has independent litigating authority to enforce Federal consumer financial laws, including the CFPA. 12 U.S.C. §§ 5531(a), 5564(a)–(b).
DEFENDANTS 7.
Defendants are any and all of the fifteen (15) Delaware statutory trusts referred to as the National Collegiate Student Loan Trusts (“NCSLTs” or “the Trusts,” which are the National Collegiate Master Student Loan Trust, NCSLT 2003-1, NCSLT 2004-1, NCSLT 2004-2, NCSLT 2005-1, NCSLT 2005-2, NCSLT 2005-3, NCSLT 2006- 1, NCSLT 2006-2, NCSLT 2006-3, NCSLT 2006-4, NCSLT 2007-1, NCSLT 2007-2, NCSLT 2007-3, and NCSLT 2007-4) and their successors and assigns. 8.
Defendants are “covered person[s]” under 12 U.S.C. § 5481(6) because they engaged in “servicing loans, including acquiring, purchasing selling [or] brokering” and in the collection of debt. 12 U.S.C. § 5481(15)(A)(i), (x). Case 1:17-cv-01323-UNA Document 1 Filed 09/18/17 Page 3 of 16 PageID #: 3
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DEFENDANTS’ UNLAWFUL ACTS OR PRACTICES 9.
The NCSLTs comprise fifteen (15) Delaware statutory trusts created between 2001 and 2007.
10.
The basic purpose of each Trust is to acquire a pool of private student loans, execute the indentures and issue notes secured by the pools of student loans, enter into the so-called trust-related agreements, and provide for the administration of the Trusts and the servicing and collection of student loans. 11.
Each Trust is an Owner-directed Delaware statutory trust formed under the laws of Delaware.
12.
Defendants do not have employees, and all actions relating to the administration of the Trusts, servicing of the student loans, and collecting debt are carried out by Defendants’ Servicers.
13.
Defendants’ Servicers are any Servicer, Primary Servicer, Subservicer, Special Servicer, Administrator, and any other individual or entity acting on behalf of the Trusts with respect to the servicing and collection of the student loans owned by the Trusts, whether retained directly by Defendants or retained by an individual or entity acting on behalf of Defendants.
14.
Each Servicer is a “covered person” under 12 U.S.C. § 5481(6) because it engaged in “servicing loans, including acquiring, purchasing, selling, [or] brokering” and in “collecting debt.” 12 U.S.C. § 5481(15)(A)(i), (x). 15.
Each Servicer acted as an agent of the Trusts. 16.
Since November 1, 2014, Defendants’ Subservicer has been Transworld Systems, Inc.
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17.
The Trusts hold more than 800,000 private student loans sold by originating lenders to the Trusts.
18.
Debt-collection activities on behalf of Defendants are carried out by Defendants’ Servicers, including the Special Servicer and the Subservicers. 19.
Defendants’ Servicers and other entities executed, notarized, and filed deceptive affidavits on behalf of Defendants. 20.
Defendants’ Servicers and other entities, on behalf of Defendants, filed collections lawsuits lacking documentation needed to prove ownership of the loans. 21.
In 2009, Defendants entered into a special servicing agreement with the Special Servicer in order to provide for the servicing, collection, and litigation of delinquent and defaulted loans. This agreement required the Special Servicer to hire Subservicers and enter into and adhere to the Default Prevention and Collection Services Agreement of March 1, 2009, as amended. 22.
In 2012, upon the resignation of the Special Servicer and pursuant to the terms of the special servicing agreement, the Back-Up Special Servicer assumed the role of Special Servicer.
23.
In 2012, the Special Servicer amended the Default Prevention and Collection Services Agreement of March 1, 2009 in order to expand the role of the Subservicer to Defendants with respect to the collection and enforcement of the student loans owned by Defendants.
FALSE AND MISLEADING AFFIDAVITS AND TESTIMONY 24.
In connection with collecting or attempting to collect debt from consumers, between November 1, 2012 and April 25, 2016, Subservicers, acting through Case 1:17-cv-01323-UNA Document 1 Filed 09/18/17 Page 5 of 16 PageID #: 5
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Defendants’ Special Servicer and acting on behalf of Defendants, initiated 94,046 collections lawsuits in courts across the country. 25.
In support of the collections lawsuits, Subservicers acting on behalf of Defendants submitted affidavits and documents in support of Defendants’ claims that consumers owed debts to Defendants.
26.
Affiants on behalf of Defendants executed, notarized, and caused to be filed affidavits—often attaching exhibits—in Defendants’ collections lawsuits. 27.
In these affidavits, the affiants swore that they had personal knowledge of the education loan records evidencing the debt.
28.
In fact, in numerous instances, affiants lacked personal knowledge of the education loan records evidencing the debt when they executed the affidavits. 29.
The affiants also swore in the affidavits that they were authorized and competent to testify about the consumers’ debts through review of and “personal knowledge” of the business records, including electronic data, in their possession. 30.
In fact, in numerous instances, affiants lacked personal knowledge of the business records, including the electronic data, showing that consumers owed debts to the Defendants.
31.
Affiants were instructed to review data on a computer screen to verify information in the affidavits about the debts. Affiants, however, did not know the source of the data on that screen, how the data was obtained or maintained, whether it was accurate, or whether those data meant that the debt was in fact owed to Defendants. 32.
Each affiant also swore that he or she had “personal knowledge of the record management practices and procedures of Plaintiff [the Trust] and the practices and procedures Plaintiff requires of its loan servicers and other agents.” Case 1:17-cv-01323-UNA Document 1 Filed 09/18/17 Page 6 of 16 PageID #: 6
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33.
In fact, affiants lacked personal knowledge of the record management practices and procedures of Defendants and the practices and procedures of Defendants’ agents.
34.
In many affidavits, the affiants also swore, “I have reviewed the chain of title records as business records” regarding the relevant account. 35.
In fact, in numerous instances, affiants did not review the chain of assignment records prior to executing the affidavits. In some cases, affiants reviewed only “chain of title” records that had been found online. In fact, at least one of Defendants’ Servicers instructed affiants that they did not need to review the chain of assignment records before executing affidavits that represented that the affiant had reviewed those records.
36.
In fact, affiants did not have access to deposit and sale agreements—the last link in the chain of assignment transferring loans into the Trust—until May 30, 2014.
37.
In many affidavits, the affiants asserted that they had personal knowledge that the loans were transferred, sold, and assigned to the Trusts on dates certain. 38.
In fact, affiants lacked personal knowledge of the chain of assignment records necessary to prove that the relevant Trust owned the subject loan. 39.
In some instances, when affiants complained to management that they did not have personal knowledge of certain representations made in the affidavits, Defendants’ Servicers instructed the affiants to continue signing the affidavits. In some instances, affiants felt “bullied” by management and followed the instructions for fear of losing their jobs.
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40.
On numerous occasions, to address a backlog of affidavits, employees of Defendants’ Servicers such as interns and mailroom clerks were instructed to execute affidavits.
41.
On numerous occasions, between November 1, 2012 and September 1, 2013, the Servicers filed stale affidavits that had earlier been executed by a previous Servicer. Contrary to the statements in the affidavits, the affiants in question were no longer “authorized to testify” in the matter and no longer had access or knowledge of the consumer’s account records or debt.
42.
Affiants also later provided live testimony in court, purportedly based on personal knowledge, similar to the statements made in the affidavits as described in Paragraphs 27–38.
IMPROPERLY NOTARIZED AFFIDAVITS 43.
Between November 1, 2012 and August 3, 2014, in connection with collecting or attempting to collect debt from consumers, Defendants’ Servicers acting on behalf of Defendants filed at least 11,412 affidavits in collections lawsuits. 44.
Between November 1, 2012 and August 3, 2014, Defendants’ Servicers acting on behalf of Defendants improperly notarized virtually every affidavit executed and filed.
45.
Affiants executed the affidavits on their own outside the presence of the notary.
46.
Affiants placed executed affidavits in a specified location. 47.
Defendants’ Servicers’ notaries later notarized stacks of previously signed affidavits all at once at their desks.
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48.
Contrary to the representations in the affidavits, affiants did not personally appear before notaries.
49.
Contrary to the representations in the affidavits, notaries did not place the affiants under oath or witness their signatures. 50.
On numerous occasions, notaries notarized affidavits executed by affiants on a prior date. At least one of Defendants’ Servicers instructed notaries to ensure that the notarization date matched the date of execution, even if that meant backdating the notarization date.
51.
In many cases, the notaries did in fact back date their notarization of the affidavits.
FILING LAWSUITS WITHOUT THE INTENT OR ABILITY TO PROVE THE CLAIMS, IF CONTESTED
52.
Defendants filed at least 1,214 collections lawsuits against consumers even though the documentation needed to prove they owned the loans was missing. Through these lawsuits, the Defendants obtained approximately $21,768,807 in judgments against consumers.
53.
In these lawsuits, documentation of a complete chain of assignment evidencing that the subject loan was transferred to the Defendants was missing. 54.
In addition, the Defendants filed at least 812 collections lawsuits where the documentation did not support Trusts’ ownership of the loans. The chain of assignment documentation shows that these loans were allegedly transferred to Defendants before they were in fact disbursed to consumers.
55.
In at least 208 other collections lawsuits, the promissory note to prove that a debt was owed did not exist or cannot be located. Case 1:17-cv-01323-UNA Document 1 Filed 09/18/17 Page 9 of 16 PageID #: 9
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56.
For each collections lawsuit described in Paragraphs 52–55, Defendants could not prove that a debt was owed to Defendants, if contested. 57.
Defendants knew, or their processes should have uncovered, that these chain of assignment documents were missing or flawed, yet Defendants continued to file collections lawsuits.
COLLECTION OF TIME-BARRED DEBT 58.
In at least 486 collections lawsuits, in connection with collecting or attempting to collect debt from consumers, Defendants filed a collections lawsuit outside the applicable statute of limitations. THE CONSUMER FINANCIAL PROTECTION ACT 59.
The CFPA provides that it is unlawful for any covered person “to offer or provide to a consumer any financial product or service not in conformity with Federal consumer financial law, or otherwise commit any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A). The CFPA grants the Bureau authority to commence a civil action against any person who violates a Federal consumer financial law, such as the CFPA. 12 U.S.C. § 5564(a). VIOLATIONS OF THE CFPA 60.
The CFPA prohibits a covered person from committing or engaging in any “unfair, deceptive, or abusive act or practice” in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. 12 U.S.C. §§ 5531, 5536(a)(1)(B). 61.
Servicing loans and collecting debt are “consumer financial products or services” under the CFPA. 12 U.S.C. § 5481(15)(A)(i), (x). Case 1:17-cv-01323-UNA Document 1 Filed 09/18/17 Page 10 of 16 PageID #: 10
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DECEPTIVE ACTS OR PRACTICES COUNT I False and Misleading Affidavits and Testimony 62.
The Bureau incorporates the allegations in Paragraphs 1–61 by reference. 63.
In numerous instances, in connection with collecting or attempting to collect debt, Defendants represented to consumers, directly or indirectly, expressly or by implication, that affiants or witnesses in court had personal knowledge of the education loan records evidencing the debt.
64.
In fact, in numerous instances, affiants and witnesses lacked personal knowledge of the education loan records evidencing the debt when they executed the affidavits.
65.
In numerous instances, Defendants represented to consumers, directly or indirectly, expressly or by implication, that affiants and witnesses had personal knowledge of the record management practices and procedures of the Trust and the practices and procedures the Trust requires of its loan servicers and other agents. 66.
In fact, affiants and witnesses lacked personal knowledge of the record management practices and procedures of the Trusts and the practices and procedures of Trusts’ agents.
67.
In numerous instances, Defendants represented to consumers, directly or indirectly, expressly or by implication, that affiants and witnesses had reviewed the chain of title records and asserted that they had personal knowledge that the loans were transferred, sold, and assigned to the Trust on dates certain. 68.
In fact, on numerous occasions, affiants and witnesses had not reviewed the chain of title records and lacked personal knowledge that the loans were transferred, Case 1:17-cv-01323-UNA Document 1 Filed 09/18/17 Page 11 of 16 PageID #: 11
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sold and assigned to the Trust.
69.
Defendants’ representations set forth in Paragraphs 63–68 are material and likely to mislead consumers acting reasonably under the circumstances. 70.
Defendants’ representations set forth in Paragraph 63–68 constitute deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531, 5536(a)(1)(B). COUNT II Improperly Notarized Affidavits 71.
The Bureau incorporates the allegations in Paragraphs 1–61 by reference. 72.
In numerous instances, in connection with collecting or attempting to collect debt, Defendants represented to consumers, directly or indirectly, expressly or by implication, that the affidavits submitted in support of its collections lawsuits were properly sworn and executed before a notary.
73.
In fact, in numerous instances, the affidavits were unsworn and executed outside the presence of a notary.
74.
Defendants’ representations set forth in Paragraphs 72–73 are material and likely to mislead consumers acting reasonably under the circumstances. 75.
Defendants’ representations set forth in Paragraph 72–73 constitute deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531, 5536(a)(1)(B). COUNT III Filing Lawsuits without the Intent or Ability to Prove the Claims, if Contested
76.
The Bureau incorporates the allegations in Paragraphs 1–61 by reference. 77.
In numerous instances, in connection with collecting or attempting to collect debt, Defendants represented to consumers, directly or indirectly, expressly or by Case 1:17-cv-01323-UNA Document 1 Filed 09/18/17 Page 12 of 16 PageID #: 12
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implication, that collections lawsuits were supported by valid and reliable legal documentation needed to obtain judgment.
78.
In fact, in numerous lawsuits, documentation of a complete chain of assignment evidencing that the subject loan was transferred to Defendants was missing. 79.
In fact, in numerous lawsuits, a promissory note proving the existence of the debt was missing.
80.
In fact, in numerous lawsuits, the Trusts could not prove their claims, if contested.
81.
Defendants’ representations set forth in Paragraphs 77–80 are material and likely to mislead consumers acting reasonably under the circumstances. 82.
Defendants’ representations set forth in Paragraph 77–80 constitute deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531, 5536(a)(1)(B). COUNT IV Collection of Time-Barred Debt 83.
The Bureau incorporates the allegations in Paragraphs 1–61 by reference. 84.
In numerous instances, in connection with collecting or attempting to collect debt, Defendants represented to consumers, directly or indirectly, expressly or by implication, that the Trusts had a legal right to obtain judgment through its collections lawsuits.
85.
In fact, in numerous instances, the statute of limitations on these loans had expired.
86.
Defendants’ representations set forth in Paragraphs 84–85 are material and likely to mislead consumers acting reasonably under the circumstances. Case 1:17-cv-01323-UNA Document 1 Filed 09/18/17 Page 13 of 16 PageID #: 13
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87.
Defendants’ representations set forth in Paragraph 84–85 constitute deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531, 5536(a)(1)(B). UNFAIR PRACTICES COUNT V Filing Lawsuits without the Intent or Ability to Prove the Claims, if Contested
88.
The Bureau incorporates the allegations in Paragraphs 1–61 by reference. 89.
Under section 1031 of the CFPA, an act or practice is unfair if it causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers, and such substantial injury is not outweighed by countervailing benefits to consumers or to competition. 12 U.S.C. §§ 5531(c), 5536(a)(1)(B). 90.
In numerous instances, in connection with collecting or attempting to collect debt through collections lawsuits, Defendants filed collections lawsuits without the intent or ability to prove the claims, if contested. 91.
Defendants’ acts or practices have caused or were likely to cause substantial injury to consumers, estimated to be at least $3.5 million in payments made in connection with these lawsuits.
92.
Consumers could not reasonably avoid the harm, and the harm was not outweighed by countervailing benefits to consumers or competition. 93.
Defendants’ acts or practices set forth in Paragraph 90–92 constitute unfair acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531(c), 5536(a)(1)(B). CONSUMER INJURY 94.
Consumers have suffered or were likely to suffer substantial injury as a result of Defendants’ violations of the CFPA. In addition, Defendants have been unjustly Case 1:17-cv-01323-UNA Document 1 Filed 09/18/17 Page 14 of 16 PageID #: 14
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enriched as a result of their unlawful acts or practices. THIS COURT’S POWER TO GRANT RELIEF 95.
The CFPA empowers this Court to grant any appropriate legal or equitable relief including, without limitation, a permanent or temporary injunction, rescission or reformation of contracts, the refund of moneys paid, restitution, disgorgement or compensation for unjust enrichment, payments of damages or other monetary relief, limits on the activities or functions of Defendants, and civil money penalties. 12 U.S.C. § 5565(a). In addition, the CFPB may recover its costs in connection with the action, if it is the prevailing party. 12 U.S.C. § 5565(b). PRAYER FOR RELIEF 96.
Wherefore, the Bureau requests that the Court: a. Permanently enjoin Defendants from committing future violations of the CFPA;
b. Grant additional injunctive relief as the Court may deem to be just and proper;
c. Award such relief as the Court finds necessary to redress injury to consumers resulting from Defendants’ violations of the CFPA, including, but not limited to, rescission or reformation of contracts, the refund of moneys paid, restitution, disgorgement or compensation for unjust enrichment, and payment of damages or other monetary relief; d. Award the Bureau civil money penalties; and e. Award the Bureau the costs of bringing this action, as well as such other and additional relief as the Court may determine to be just and proper.
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Dated: September 18, 2017
Respectfully submitted,
ANTHONY ALEXIS Enforcement Director
Deborah Morris Deputy Enforcement Director
/s/ Carolyn Hahn _ Carolyn Hahn (E-mail: [email protected]) (Phone: 202-435-7250 Edward Keefe (E-mail: [email protected]) (Phone: 202-435-9198) Enforcement Attorneys Consumer Financial Protection Bureau 1700 G Street NW Washington, DC 20552 Telephone: (202) 435-9198 Facsimile: (202) 435-7722 Email: [email protected]
For the Consumer Financial Protection Bureau
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Consent order ()
PDF of this document (40 pages)
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
Consumer Financial Protection Bureau, Plaintiff, v.
THE NATIONAL COLLEGIATE MASTER STUDENT LOAN TRUST; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2003-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2004-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2004-2; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-2; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-3; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-2; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-3; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-4; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-2; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-3; and NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-4, Delaware Statutory Trusts, Defendants.
Case No.
[PROPOSED] CONSENT JUDGMENT Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 1 of 40 PageID #: 23
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Plaintiff, the Consumer Financial Protection Bureau (“Bureau”), commenced this civil action against fifteen (15) Delaware statutory trusts referred to as the National Collegiate Student Loan Trusts (“NCSLTs” or “the Trusts”), which are the National Collegiate Master Student Loan Trust, NCSLT 2003-1, NCSLT 2004-1, NCSLT 2004-2, NCSLT 2005-1, NCSLT 2005-2, NCSLT 2005-3, NCSLT 2006-1, NCSLT 2006-2, NCSLT 2006-3, NCSLT 2006-4, NCSLT 2007-1, NCSLT 2007-2, NCSLT 2007-3, and NCSLT 2007-4 on September 14, 2017, to obtain injunctive relief, damages and other monetary relief, and civil money penalties.
The Complaint alleges violations of sections 1031(a) and 1036(a)(1) of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a)(1). Plaintiff and Defendants request that the Court enter this Consent Judgment. The parties have agreed to resolve this case without further litigation. The Defendants waive service, answering the Complaint, and consent to the entry of this Consent Judgment against them by this Court, the terms of which are set forth herein. FINDINGS
1.
This Court has jurisdiction over the parties and the subject matter of this action.
2.
Plaintiff and Defendants agree to entry of this Order to settle and resolve all matters in this dispute arising from the conduct alleged in the Complaint to the date this Order is entered.
3.
Defendants neither admit nor deny any allegations in the Complaint, except as specifically stated in this Order. For the purposes of this Order, Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 2 of 40 PageID #: 24
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Defendants admit the facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action. 4.
Since at least November 1, 2012, in order to collect on defaulted private student loans, Defendants’ Servicers filed Collections Lawsuits on behalf of Defendants in state courts across the country. In support of these lawsuits, Subservicers on behalf of Defendants executed and filed affidavits that falsely claimed personal knowledge of the account records and the consumer’s debt, and in many cases, personal knowledge of the chain of assignments establishing ownership of the loans. In addition, Defendants’ Servicers on behalf of Defendants filed more than 2,000 debt collections lawsuits without the documentation necessary to prove Trust ownership of the loans or on debt that was time-barred. Finally, notaries for Defendants’ Servicers notarized over 25,000 affidavits even though they did not witness the affiants’ signatures.
5.
Defendants waive any rights to seek judicial review or otherwise challenge or contest the validity of this Order. Defendants also waive any claim it may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each party will bear its own costs and expenses, including without limitation attorneys’ fees. 6.
Entry of this Order is in the public interest.
DEFINITIONS
7.
The following definitions apply to this Order: Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 3 of 40 PageID #: 25
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a.
“Administration Agreements” means the agreements by and among each of the Trusts and the Administrator dated November 1, 2001 (Master Trust); December 11, 2003 (NCSLT 2003-1); September 10, 2004 (NCSLT 2004-1); October 28, 2004 (NCSLT 2004-2); February 23, 2005 (NCSLT 2005-1); June 9, 2005 (NCSLT 2005- 2); October 12, 2005 (NCSLT 2005-3); March 9, 2006 (NCSLT 2006-1); June 9, 2006 (NCSLT 2006-2); June 8, 2006 (NCSLT 2006-3); December 7, 2006 (NCSLT 2006-4); March 8, 2007 (NCSLT 2007-1); June 14, 2007 (NCSLT 2007-2); September 20, 2007 (NCSLT 2007-3); and September 20, 2007 (NCSLT 2007-4). b.
“Administrator” means the Administrator, as defined in the Trust Indenture, providing certain duties of the Trusts pursuant to the Administration Agreements.
c.
“Affected Consumers” includes Consumers who are or were subject to a Collections Lawsuit filed by Defendants’ agents on behalf of Defendants on or after November 1, 2012 to collect a Debt where (a) the documentation necessary to prove the existence of the Debt does not exist or cannot be located by Defendants; (b) the documentation necessary to prove Trust ownership of the Debt does not exist or cannot be located by Defendants; or (c) the lawsuit was time-barred.
d.
“Affiant” means any signatory to an Affidavit, other than one signing solely as a notary or witness to the act of signing, signing in his or her capacity as an employee or agent of Defendants, Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 4 of 40 PageID #: 26
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including employees or agents of Defendants’ Servicers or Subservicers.
e.
“Affidavit” means any sworn statement filed with a court in connection with litigation to collect on a Debt. f.
“Board” means the registered owner of a majority of the beneficial interest in each of the Trusts.
g.
“Clearly and Prominently” means i.
as to written information: written in a type size and location sufficient for an ordinary consumer to read and comprehend it and disclosed in a manner that would be easily recognizable and understandable in language and syntax to an ordinary consumer; if the information is contained in a multi-page print document, the disclosure appears on the first page.
ii.
as to information presented orally: spoken and disclosed in a volume, cadence, and syntax sufficient for an ordinary consumer to hear and comprehend.
h.
“Collections Lawsuits” means attempts by Defendants’ Servicers on behalf of Defendants (or a third party acting on their behalf for an account owned or alleged to be owned by Defendants) through judicial processes in the United States of America, to collect or establish a Consumer’s liability for a Debt. i.
“Consumer” means any natural person obligated or allegedly obligated to pay any Debt.
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j.
“Debt” means any obligation or alleged obligation of a Consumer to pay money arising out of a transaction in which the money, property, insurance, or services that are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.
k.
“Effective Date” means the date on which the Order is entered on the docket by the Court.
l.
“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his or her delegate.
m.
“Primary Servicer” means the Servicer servicing student loans for Defendants under the Amended and Restated Private Student Loan Servicing Agreement dated September 28, 2006. n.
“Related Consumer Action” means a private action by or on behalf of one or more Consumers or an enforcement action by another governmental agency brought against Defendants based on substantially the same facts as described in the Complaint. o.
“Relevant Period” includes the period from November 1, 2012 to the Effective Date.
p.
“Defendants” means any or all of the fifteen (15) Delaware statutory trusts referred to as the National Collegiate Student Loan Trusts (“NCSLTs” or “the Trusts,” which are the National Collegiate Master Student Loan Trust, NCSLT 2003-1, NCSLT 2004-1, NCSLT Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 6 of 40 PageID #: 28
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2004-2, NCSLT 2005-1, NCSLT 2005-2, NCSLT 2005-3, NCSLT 2006-1, NCSLT 2006-2, NCSLT 2006-3, NCSLT 2006-4, NCSLT 2007-1, NCSLT 2007-2, NCSLT 2007-3, and NCSLT 2007-4) and their successors and assigns.
q.
“Servicer” (or “Trusts’ Servicer”) means any Servicer, Primary Servicer, Subservicer, Special Servicer, Administrator, and any other individual or entity acting on behalf of Defendants with respect to the servicing of the student loans owned by Defendants, whether retained directly by Defendants or retained by an individual or entity acting on behalf of Defendants. r.
“Servicing Agreement” means any Servicing Agreement that meets the definition of Servicing Agreement in each Trust’s Indenture. s.
“Special Servicer” means the Servicer providing services to the Trusts with respect to defaulted and delinquent student loans under the Special Servicing Agreements dated March 1, 2009 and May 1, 2009 (the “Special Servicing Agreements”). t.
“Subservicer” means any service provider that was retained by, and contracted with, directly or indirectly, the Special Servicer, as an agent of the Special Servicer, to provide services, including default prevention, and collection services, including but not limited to litigation, with respect to the servicing of the student loans owned by Defendants.
u.
“The Trust Agreements” are the Trust Agreements creating each of the Trusts.
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ORDER IT IS ORDERED that:
I. Conduct Requirements 8.
Defendants must provide all Defendants’ Servicers that are engaged in the servicing or collection of Debts with actual notice of this Order within thirty (30) days of the Effective Date.
9.
Defendants and their officers, agents, servants, employees, and attorneys who have actual notice of this Order, including but not limited to all of Defendants’ Servicers, whether acting directly or indirectly, may not violate sections 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531, 5536, and must take the following affirmative actions: a.
Defendants shall take all actions necessary to comply with the terms of the Order, including but not limited to ensuring that all of Defendants’ Servicers acting as Defendants’ agents comply with the terms of the Order.
b.
Defendants must require that any of Defendants’ Servicers or other agents retained by Defendants in connection with servicing or collection of student loans (1) agree to abide by the terms and conditions of the Order and (2) require any agents that Defendants’ Servicers hire in connection with servicing or collection of student loans to abide by the terms and conditions of the Order. c.
Defendants and their officers, agents, servants, employees, and attorneys who have actual notice of this Order, including but not limited to all of Defendants’ Servicers, whether acting directly or Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 8 of 40 PageID #: 30
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indirectly, may not initiate a Collections Lawsuit to collect Debt unless they possess:
i.
the documentation necessary to prove that a Trust owns the loan, including but not limited to, documentation reflecting the complete chain of assignment from the Debt’s originator to the specific Trust claiming ownership; and ii.
a document signed by the Consumer, such as a promissory note, evidencing the agreement to pay the loan forming the basis of the Debt.
d.
Defendants and their officers, agents, servants, employees, and attorneys who have actual notice of this Order, including but not limited to all of Defendants’ Servicers, whether acting directly or indirectly, may not initiate a Collections Lawsuit to collect on a loan for which the applicable statute of limitations has expired. e.
Defendants and their officers, agents, servants, employees, and attorneys who have actual notice of this Order, including but not limited to all of Defendants’ Servicers, whether acting directly or indirectly, may not collect any Debt through Collections Lawsuits that Defendants or their agents have any reason to believe may be unenforceable.
f.
Defendants, their officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, including but not limited to all of Defendants’ Servicers, whether acting Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 9 of 40 PageID #: 31
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directly or indirectly, are permanently restrained and prohibited, in connection with the collection of a Debt, from submitting any Affidavit:
i.
containing an inaccurate statement;
ii.
in which the Affiant represents, expressly or by implication, that the Affiant is familiar with or has personal knowledge of the Consumer’s education loan records or the maintenance of those records when that is not the case; iii.
in which the Affiant represents, expressly or by implication, that the Affiant has personal knowledge of the Consumer’s Debt when that is not the case;
iv.
in which the Affiant represents, expressly or by implication, that the Affiant has personal knowledge of the loan’s chain of assignment or ownership when that is not the case; v.
in which the Affiant represents, expressly or by implication, that the Affiant has personal knowledge of the documents relating to the loan’s chain of assignment or ownership when that is not the case;
vi.
representing, expressly or by implication, that the Affidavit has been properly notarized if the Affidavit was not executed in the presence of a notary or if the notarization was otherwise not compliant with applicable notary laws; or vii.
in which the Affiant represents, expressly or by implication, that any documents or records concerning the Debt that Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 10 of 40 PageID #: 32
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forms the basis of the Collections Lawsuit have been reviewed by the Affiant when that is not the case. 10.
Defendants are permanently restrained and prohibited from reselling Debt that is time-barred or for which Defendants lack the necessary documentation required by Paragraph 9(c) without obtaining the written agreement of the purchaser to comply with this Order. 11.
Defendants, their officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, including but not limited to all of Defendants’ Servicers, whether acting directly or indirectly, are permanently restrained and prohibited from, in connection with the collection of a Debt, providing any testimony in a Collections Lawsuit that contains any misrepresentations, including false statements that the witness:
a.
is familiar with or has personal knowledge of the Consumer’s education loan records or the maintenance of those records; b.
has personal knowledge of the Consumer’s Debt; c.
has personal knowledge of the loan’s chain of assignment or ownership; or d.
has personal knowledge of the documents relating to the loan’s chain of assignment or ownership.
12.
If Defendants determine that any of their agents, including but not limited to all of Defendants’ Servicers, are on behalf of Defendants engaging in any conduct prohibited by this Order, including but not limited to Paragraphs Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 11 of 40 PageID #: 33
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9 and 11 of this Order, Defendants promptly will take the necessary steps to ensure that their agents cease any and all practices that violate this Order.
13.
Within thirty (30) days of making any determination described in Paragraph 12, Defendants must submit to the Enforcement Director a report detailing (1) the practices that violate the Order, (2) the specific agents engaged in the practices in question, and (3) a plan to ensure that the practices cease and to remediate any harm resulting from the practices.
14.
With regard to pending Collections Lawsuits in which Defendants, through actions taken by Defendants’ Servicers acting on behalf of Defendants, have filed an Affidavit that contains any misrepresentations—including but not limited to false statements that the Affiant (1) is familiar with or has personal knowledge of the Consumer’s education loan records or the maintenance of those records, (2) has personal knowledge of the Consumer’s indebtedness, (3) has personal knowledge of the loan’s chain of assignment or ownership, (4) has personal knowledge about the maintenance of documents relating to the loan’s chain of assignment or ownership, or (5) has attached as an exhibit a true and correct copy of a document—Defendants must either withdraw the pending Collections Lawsuit or ensure that the Affidavit is withdrawn. Defendants must instruct their attorneys, Defendants’ Servicers, and their agents to either withdraw the pending Collections Lawsuit or notify the court of the following in writing while simultaneously providing the court with a copy Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 12 of 40 PageID #: 34
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of the Order entered into between the Bureau and Defendants: “Plaintiff withdraws the affidavit of [insert name of affiant] pursuant to an Order entered into by the Consumer Financial Protection Bureau and the National Collegiate Student Loan Trusts.”
15.
With regard to concluded Collections Lawsuits in which Defendants, through actions of Defendants’ Servicers acting on behalf of Defendants, filed with a court or in arbitration an Affidavit that contained any misrepresentations—including but not limited to false statements that the Affiant (1) is familiar with or has personal knowledge of the Consumer’s education loan records or the maintenance of those records, (2) has personal knowledge of the Consumer’s indebtedness, (3) has personal knowledge of the loan’s chain of assignment or ownership, (4) has personal knowledge about the maintenance of documents relating to the loan’s chain of assignment or ownership, or (5) has attached as an exhibit a true and correct copy of a document—Defendants must instruct their attorneys, the Defendants’ Servicers, and their agents to cease postjudgment enforcement activities and will seek, and will instruct their agents to seek, to remove, withdraw, or terminate any active wage garnishment, bank levies, and similar means of enforcing those judgments or settlements as well as cease accepting settlement payments related to any such concluded Collections Lawsuits.
16.
With regard to servicing of Debt owned by Defendants, Defendants shall within ten (10) days of the Effective Date (1) direct the Primary Servicer to cease transferring any Debt to the Special Servicer and any Subservicer and Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 13 of 40 PageID #: 35
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instead retain possession of the Debt pending approval and implementation of the Compliance Plan provided for in Section III; (2) direct the Special Servicer and any Subservicer to suspend further collection efforts on all Debt owned by Defendants pending approval and implementation of the Compliance Plan provided for in Section III; (3) direct the Special Servicer and any Special Servicer agent to discontinue making outbound call attempts, sending collection letters, providing negative reports to any of consumer reporting agencies the credit bureaus, or other efforts as may be instructed by Defendants and are necessary to effectuate compliance with this Order; (4) direct the Primary Servicer to instruct the Special Servicer and all Subservicers to return to the Primary Servicer all student loans in their portfolio owned by Defendants that are completed and the subject of each monthly Compliance Audit Report described in Paragraph 20; and (5) direct Defendants’ Servicers to take any other appropriate actions necessary to effectuate compliance with this Order as instructed by the Defendants.
17.
Defendants shall direct (1) the Primary Servicer and Special Servicer to remit all payments from Consumers to an escrow account as designated by Defendants pursuant to Paragraph 18; (2) the Subservicer to remit funds to the Special Servicer and the Special Servicer to remit those payments to the escrow account as designated by Defendants pursuant to Paragraph 18; and (3) the Primary Servicer and Special Servicer to provide an itemized report to the Defendants identifying the payments remitted at the loan level in a format approved by the Defendants.
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18.
Nothing in this Order shall prohibit Defendants or their Servicers from accepting payments from Consumers made in the regular course on Debt that is not subject to a Collections Lawsuit. All such payments shall be held in escrow until the requirements of Paragraphs 9(c)(1) and (2) are satisfied and Defendants have determined that sufficient loan documentation exists to either retain the payment or refund the amount paid as to be provided for in the Compliance Plan of Section III. Defendants may use funds from the escrow to carry out Trust operations, including payments to noteholders sufficient to avoid events of default under the Indenture Trust, auditors, consultants, accountants, legal counsel, and other necessary professionals.
II. Compliance Audit 19.
Within thirty (30) days of the Effective Date, Defendants must secure and retain one or more qualified, independent consultants or auditors with specialized experience in the servicing of student loans, and acceptable to the Enforcement Director, to conduct an independent audit of all of the servicing and collecting conducted by Defendants’ Servicers on student loans owned by Defendants from inception of each of the Trusts to the present, using procedures and standards generally acceptable to the student loan–servicing industry. The purposes of the Compliance Audit must be to determine, at a minimum:
a.
For each and every student loan, whether Defendants, or their agents (including Defendants’ Servicers), have or ever had in their possession sufficient loan documentation, including signed Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 15 of 40 PageID #: 37
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promissory notes and documentation reflecting the complete chain of assignment since the loan’s origination, to support the claim that a Debt is currently owed to a Trust, including but not limited to, assignments from the Debt’s originator to the Trust claiming ownership and any subsequent assignments by the Trust to a student loan guarantor (such as The Education Resources Institute or its successors);
b.
Whether certain loans owned by Defendants are no longer legally enforceable because the applicable statute of limitations has expired;
c.
Whether Collections Lawsuits have been filed on any loans for which sufficient documentation, including signed promissory notes and documentation reflecting the complete chain of assignment from the Debt’s originator to the Collections Lawsuit’s named plaintiff, is not in the possession of the Collections Lawsuit’s named plaintiff, or a Defendants’ Servicer acting on behalf of the named plaintiff, to prove the existence of the Debt owed to the Trust in question, or where the applicable statute of limitations has expired; d.
Whether judgments were obtained in Collections Lawsuits described in Paragraph 19(c), the identity of Consumers from whom the Defendants obtained payments in response to those Collections Lawsuits, and the specific amounts collected from these Consumers;
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e.
Whether any student loans were disbursed to the Consumers after the loans allegedly were transferred to the Defendants; f.
Whether any of Defendants’ agents, including but not limited to any of Defendants’ Servicers, have failed to comply with any Federal consumer financial law or any of the Servicers’ Servicing Guidelines; and g.
Whether any of Defendants’ agents, including but not limited to any of Defendants’ Servicers, are or have engaged in any practices on behalf of Defendants after the Effective Date that violate this Order. 20.
Within one hundred and eighty (180) days of the Effective Date and each thirty (30) days thereafter until finished, the independent consultant(s) must provide a written report to Defendants detailing the findings of the audit (the “Compliance Audit Reports”). The Compliance Audit Report with respect to additional Affected Consumers shall be completed within one hundred and eighty (180) days of the Effective Date, and the remainder of the Compliance Audit Reports within three hundred and sixty (360) days of the Effective Date. The Compliance Audit Report shall include the auditors’ findings, conclusions, and a description of its methodology.
21.
Defendants must provide the Compliance Audit Reports to the Enforcement Director within fourteen (14) days of receipt by Defendants. 22.
Within thirty (30) days of receiving the final Compliance Audit Report identified in Paragraph 20, Defendants must submit to the Enforcement Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 17 of 40 PageID #: 39
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Director for review and non-objection an amendment to the Compliance Plan (“Amended Compliance Plan”) described in Section III to: a.
ensure the withdrawal and dismissal without prejudice of any pending Collections Lawsuits identified in Paragraph 19(c); b.
ensure that Defendants and their agents, including but not limited to any of Defendants’ Servicers, will not take any steps to initiate collections or furnish negative reports to consumer reporting agencies, on loans identified in Paragraph 19(a), or accept payments on any defaulted Debts, unless and until Defendants first verify the existence of the documentation referenced in that subparagraph in order to prove the existence of the Debt and the identity of the current owner;
c.
ensure that Defendants and their agents, including but not limited to any of Defendants’ Servicers, will not take any steps to collect Debts by any means on any loans identified in Paragraph 19(b) without Clearly and Prominently disclosing to the Consumer as follows:
i.
For those time-barred debts that generally cannot be included in a consumer report under the provisions of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681c(a), but can be collected through other means pursuant to applicable state law, Defendants will instruct their agents to include the following statement: “The law limits how long you can be sued on a debt and how long a debt can appear on your Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 18 of 40 PageID #: 40
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credit report. Due to the age of this debt, we will not sue you for it or report payment or non-payment of it to a credit bureau.”
ii.
For those time-barred debts that can be collected through other means pursuant to applicable state law, and may be included in a consumer report under the provisions of FCRA, 15 U.S.C. § 1681c(a), Defendants will instruct their agents to include the following statement: “The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it.”
23.
Defendants and their agents are prohibited from making any representation or statement, or from taking any other action that interferes with, detracts from, contradicts, or otherwise undermines the disclosures required in Paragraph 22.
24.
Defendants will be deemed to have complied with the disclosure requirements of Paragraph 22 if Defendants or their agents makes a disclosure to Consumers in a specific jurisdiction that (1) is required by the laws or regulations of that jurisdiction, (2) complies with those laws or regulations, and (3) is substantially similar to the disclosure required by Paragraph 22.
25.
The Enforcement Director will have the discretion to make a determination of non-objection to the Amended Compliance Plan or to direct the Defendants to revise it. If the Enforcement Director directs the Defendants to revise the Amended Compliance Plan, Defendants must Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 19 of 40 PageID #: 41
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make the requested revisions and resubmit the Amended Compliance Plan to the Enforcement Director within thirty (30) days. 26.
After receiving notification that the Enforcement Director has made a determination of non-objection to the Amended Compliance Plan, Defendants must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Amended Compliance Plan. 27.
Within thirty (30) days of receiving notification that the Enforcement Director has made a determination of non-objection to the Amended Compliance Plan, Defendants will provide the Amended Compliance Plan and the Compliance Audit Reports to Transworld Systems, Inc. (“TSI”), or, if applicable, to the Defendants’ successor Special Servicer or Subservicer. III.
Compliance Plan 28.
Within one hundred and twenty (120) days of the Effective Date, Defendants must submit to the Enforcement Director for review and determination of non-objection a comprehensive compliance plan designed to ensure that Defendants and Defendants’ Servicers acting on their behalf comply with all applicable Federal consumer financial laws and the terms of this Order (“Compliance Plan”). The Compliance Plan must include, at a minimum:
a.
Detailed steps for addressing each action required by this Order including operations meetings with the Primary Servicer; b.
Specific timeframes and deadlines for implementation of the steps described above; and Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 20 of 40 PageID #: 42
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c.
Comprehensive, written policies and procedures designed to ensure that any agents acting on behalf of the Defendants do not engage in practices in violation of this Order. These policies and procedures must include:
i.
Detailed steps for addressing each action required of the Defendants or their agents, including but not limited to the Defendants’ Servicers, by this Order; ii.
Comprehensive, written policies and procedures designed to prevent violations of Federal consumer financial laws and associated risks of harm to Consumers including regular operations meetings with and audits of each Servicer and establishment of procedures to respond to exception requests;
iii.
An effective employee training program required for all of the agents’ employees, including but not limited to Affiants, whose duties include reviewing, drafting, preparing, processing, verification, execution or notarization of Affidavits that includes regular, specific, comprehensive training in Federal consumer financial laws commensurate with individual job functions and duties; iv.
Implementation of reasonable and appropriate written policies and procedures to ensure the proper notarization processes for Affidavits, including that notaries place the Affiants under oath and witness their signatures; Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 21 of 40 PageID #: 43
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v.
Implementation of reasonable and appropriate written policies and procedures to ensure that Affiants verify the accuracy of each statement made in an Affidavit before executing the Affidavit; and vi.
Comprehensive, written policies and procedures designed to ensure that any law firms engaged by any agent to collect Debt does not violate any Federal consumer financial laws, which must include, at a minimum: (1) the law firm’s duty to maintain adequate internal controls to ensure compliance with Federal consumer financial laws;
(2) the law firm’s duty to provide adequate training on compliance with all applicable Federal consumer financial laws and the agent’s policies and procedures related to Collections Lawsuits;
(3) the agent’s authority to conduct periodic onsite reviews of the law firm’s controls, performance, and information systems related to Collections Lawsuits; and (4) periodic review by the agent of the law firm’s controls, performance, and information systems related to Collections Lawsuits.
29.
The Enforcement Director will have the discretion to make a determination of non-objection to the Compliance Plan or direct Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 22 of 40 PageID #: 44
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Defendants to revise it. If the Enforcement Director directs Defendants to revise the Compliance Plan, Defendants must make the revisions and resubmit the Compliance Plan to the Enforcement Director within thirty (30) days.
30.
After receiving notification that the Enforcement Director has made a determination of non-objection to the Compliance Plan or any amendments thereto, Defendants must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Compliance Plan.
IV.
Role of the Board 31.
The Board must review all submissions (including plans, reports, programs, policies, and procedures) required by this Order prior to submission to the Bureau.
32.
Although this Order requires Defendants to submit certain documents for the review or non-objection by the Enforcement Director, the Board of Defendants will have the ultimate responsibility for proper and sound management of Defendants and for ensuring that Defendants comply with Federal consumer financial law and this Order. 33.
In each instance that this Order requires the Board to ensure adherence to or perform certain obligations of Defendants, the Board must: a.
Authorize whatever actions are necessary for Defendants to fully comply with the Order;
b.
Require timely reporting by Defendants’ Servicers to the Board on the status of compliance obligations; and Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 23 of 40 PageID #: 45
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c.
Require timely and appropriate corrective action to remedy any material non-compliance with any failures to comply with Board directives related to this Section.
V. Order to Pay Redress 34.
Within ten (10) days of the Effective Date, the Defendants must reserve or deposit into a segregated deposit account $3,500,000, for the purpose of providing redress to Affected Consumers as required by this Section. 35.
Within one-hundred and twenty (120) days of the Effective Date, the Defendants must submit to the Enforcement Director for review and nonobjection a comprehensive written plan for providing redress to the previously identified Affected Consumers consistent with this Order (“Redress Plan”). The Enforcement Director will have the discretion to make a determination of non-objection to the Redress Plan or direct Defendants to revise it. If the Enforcement Director directs Defendants to revise the Redress Plan, Defendants must make the revisions and resubmit the Redress Plan to the Enforcement Director within thirty (30) days. After receiving notification that the Enforcement Director has made a determination of non-objection to the Redress Plan, Defendants must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Redress Plan.
36.
The Redress Plan must apply to all Affected Consumers and: a.
Specify how Defendants will identify all Affected Consumers; Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 24 of 40 PageID #: 46
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b.
Provide processes for providing redress covering all Affected Consumers including providing redress for: i.
Affected Consumers where the documentation necessary to prove the existence of the Debt did not exist or cannot be located by Defendants;
ii.
Affected Consumers where the documentation necessary to prove Trust ownership of the Debt did not exist or cannot be located by Defendants; and iii.
Affected Consumers who were subject to a Collections Lawsuit outside the applicable statute of limitations. c.
Include a description of the following: i.
Methods used to compile a list of potential Affected Consumers;
ii.
Methods used to calculate the amount of redress to be paid to each Affected Consumer;
iii.
Procedures for issuance and tracking of redress to Affected Consumers; and iv.
Procedures for monitoring compliance with the Redress Plan.
37.
The Redress Plan, at a minimum, must provide full restitution of all amounts collected since the initiation of the Collections Lawsuit filed against them from:
a.
The approximately 2,700 Affected Consumers identified prior to the Effective Date, who paid approximately $3,500,000; and Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 25 of 40 PageID #: 47
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b.
The Affected Consumers identified by the Compliance Audit in Section II.
38.
The Redress Plan must describe the process for providing redress for Affected Consumers and must include the following requirements: a.
A timetable for providing restitution to Affected Consumers identified in Paragraph 37(a) and (b) that provides restitution to each group of Affected Consumers as soon as practicable; b.
Defendants must mail a bank check to each Affected Consumer along with a Redress Notification Letter (as defined below); c.
Defendants must send the bank check by United States Postal Service first-class mail, address correction service requested, to the Affected Consumer’s last known address as maintained by Defendants’ records;
d.
Defendants must make reasonable attempts to obtain a current address for any Affected Consumer whose Redress Notification Letter or redress check is returned for any reason, using the National Change of Address System, and must promptly re-mail all returned letters and redress checks to current addresses, if any; and e.
Processes for handling any unclaimed funds. 39.
With respect to redress paid to Affected Consumers, the Redress Plan must include:
a.
The form of the letter (“Redress Notification Letter”) to be sent notifying Affected Consumers of the redress, which must include language explaining the manner in which the amount of redress Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 26 of 40 PageID #: 48
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was calculated and a statement that the provision of the refund payment is in accordance with the terms of this Order; and b.
The form of the envelope that will contain the Redress Notification Letter.
40.
Defendants must not include in any envelope containing a “Redress Notification Letter” any materials other than the approved letters and redress checks, unless Defendants have obtained written confirmation from the Enforcement Director that the Bureau does not object to the inclusion of such additional materials.
41.
Within ninety (90) days of completion of the Redress Plan, Defendants must submit a report (“Redress Plan Report”) to the Enforcement Director, which must include a review and assessment from an independent auditor agreed upon by Defendants and the Enforcement Director, on Defendants’ compliance with the terms of the Redress Plan, including:
a.
The methodology used to determine the population of Affected Consumers;
b.
The redress amount for each Affected Consumer; c.
The total number of Affected Consumers;
d.
The procedures used to issue and track redress payments; e.
The amount, status, and planned disposition of all unclaimed redress payments; and Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 27 of 40 PageID #: 49
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f.
A description of the work of independent consultants that Defendants have used, if any, to assist and review their execution of the Redress Plan.
42.
Defendants must submit an Amended Redress Plan within thirty (30) days of the completion of the Compliance Audit with respect to additional Affected Consumers required by Section II that incorporates the results of that Audit. The amended Redress Plan must contemplate providing full restitution to all additional Affected Consumers identified in the Compliance Audit within 120 days of submission of the Amended Redress Plan.
43.
Defendants must provide all of the relief to Consumers required by the Order, regardless of whether the total of such relief exceeds the amount reserved or deposited into a segregated account in this Section. 44.
After completing the Redress Plan, if the amount of redress provided to Affected Consumers is less than $3,500,000, within thirty (30) days of the completion of the Redress Plan, Defendants must pay to the Bureau, by wire transfer to the Bureau or to the Bureau’s agent, and according to the Bureau’s wiring instructions, the difference between the amount of redress provided to Affected Consumers and $3,500,000. 45.
The Bureau may use these remaining funds to pay additional redress to Affected Consumers. If the Bureau determines, in its sole discretion, that additional redress is wholly or partially impracticable or otherwise inappropriate, or if funds remain after the additional redress is completed, the Bureau will deposit any remaining funds in the U.S. Treasury as Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 28 of 40 PageID #: 50
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disgorgement. Defendants will have no right to challenge any actions that the Bureau or its representatives may take under this Section. 46.
Defendants may not condition the payment of any redress to any Affected Consumer under this Order on that Affected Consumer’s waiving any right.
47.
With regard to the Debt that has yet to be collected from Affected Consumers for whom Defendants and their agents do not possess or cannot locate the documentation necessary to prove the existence of the Debt or Defendants’ ownership of the Debt, Defendants must within one hundred and twenty (120) days of the Effective Date—and for Affected Consumers identified in the Compliance Audit Reports, within thirty (30) days of the completion of the Compliance Audit Reports—instruct that their agents within 90 days:
a.
Withdraw, dismiss, or terminate all pending Collections Lawsuits filed against Affected Consumers;
b.
Release or move to vacate all judgments obtained during the Relevant Time Period in connection with these Collections Lawsuits;
c.
Cease post-judgment enforcement activities and seek to remove, withdraw, or terminate its active wage garnishment, bank levies, and similar means of enforcing those judgments or settlements as well as cease accepting settlement payments related to any Collections Lawsuits;
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d.
Refrain from (i) representing to a Consumer or any other person that Defendants are or were owed a Debt, (ii) taking any steps to collect or to seek to collect the Debt in question, (iii) furnishing reports on the Debt in question, except as otherwise required by this Order; and e.
Request that the consumer reporting agencies correct any affected collection account or tradeline, which may include amending, deleting, or suppressing the incorrect account or tradeline. 48.
With regard to time-barred Debt that has yet to be collected from Affected Consumers, Defendants and their agents will not take any steps to collect Debts by any means without Clearly and Prominently disclosing to the consumer:
a.
For those time-barred debts that generally cannot be included in a consumer report under the provisions of the FCRA, 15 U.S.C. § 1681c(a), but can be collected through other means pursuant to applicable state law, Defendants will instruct their agents to include the following statement: “The law limits how long you can be sued on a debt and how long a debt can appear on your credit report. Due to the age of this debt, we will not sue you for it or report payment or non-payment of it to a credit bureau.” b.
For those time-barred debts that can be collected through other means pursuant to applicable state law, and may be included in a consumer report under the provisions of the FCRA, 15 U.S.C. § 1681c(a), Defendants will instruct their agents to include the Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 30 of 40 PageID #: 52
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following statement: “The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it.” 49.
Defendants and their agents are prohibited from making any representation or statement, or from taking any other action that interferes with, detracts from, contradicts, or otherwise undermines the disclosures required in Paragraph 48.
50.
Defendants will be deemed to have complied with the disclosure requirements of Paragraph 48 if Defendants or their agents make a disclosure to Consumers in a specific jurisdiction that (1) is required by the laws or regulations of that jurisdiction, (2) complies with those laws or regulations, and (3) is substantially similar to the disclosure required by Paragraph 48.
VI.
Order to Pay Disgorgement 51.
Defendants shall pay $7,800,000 as disgorgement for the proceeds they received from the unlawful practices related to the filing of Collections Lawsuits during the Relevant Period.
52.
Within ten (10) days of the Effective Date, Defendants shall pay the above amount in the form of a wire transfer to the Bureau or such agent as the Bureau may direct, and in accordance with wiring instructions to be provided by counsel for the CFPB. The Bureau will then transfer the payment to the United States Treasury as disgorgement. 53.
In the event of any default on Defendants’ obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 31 of 40 PageID #: 53
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will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable. VII. Order to Pay Civil Money Penalty 54.
Under section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law described in the Complaint, and taking into account the factors in 12 U.S.C. § 5565(c)(3), the Defendants must pay a civil money penalty of $7,800,000 to the Bureau.
55.
Within ten (10) days of the Effective Date, Defendants must pay the civil money penalty by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions. 56.
The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).
57.
Defendants must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, Defendants may not: a.
Claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b.
Seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order.
58.
To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendants may not argue that Defendants are entitled Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 32 of 40 PageID #: 54
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to, nor may Defendants benefit by, any offset or reduction of any compensatory monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action or because of any payment that the Bureau makes from the Civil Penalty Fund (“Penalty Offset”). If the court in any Related Consumer Action grants such a Penalty Offset, Defendants must, within thirty (30) days after entry of a final order granting the Penalty Offset, notify the Enforcement Director, and pay the amount of the Penalty Offset to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action. VIII. Additional Monetary Provisions 59.
In the event of any default on Defendants’ obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment and will immediately become due and payable. 60.
Defendants must relinquish all dominion, control, and title to the funds paid to the fullest extent permitted by law and no part of the funds may be returned to Defendants.
61.
Under 31 U.S.C. § 7701, Defendants, unless they already have done so, must furnish to the Bureau their taxpayer identifying numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.
62.
Within thirty (30) days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Defendants must notify the Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 33 of 40 PageID #: 55
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Enforcement Director of the final judgment, consent order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendants paid or is required to pay to Consumers and describe the Consumers or classes of Consumers to whom that redress has been or will be paid.
IX.
Reporting Requirements
63.
Defendants must notify the Enforcement Director of any development that may affect compliance obligations arising under this Order, including but not limited to a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the filing of any bankruptcy or insolvency proceeding by or against Defendants; or a change in Defendants’ name or address. Defendants must provide this notice, if practicable, at least thirty (30) days before the development but in any case no later than fourteen (14) days after the development.
64.
Within one hundred and twenty (120) days of the Effective Date, and again one year after the Effective Date, Defendants must submit to the Enforcement Director an accurate written compliance progress report (“Compliance Report”) that has been approved by the Board, which, at a minimum:
a.
Describes in detail the manner and form in which Defendants have complied with this Order; and Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 34 of 40 PageID #: 56
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b.
Attaches a copy of each Order Acknowledgment obtained under Section X, unless previously submitted to the Enforcement Director. X. Order Distribution and Acknowledgment
65.
Within thirty (30) days of the Effective Date, Defendants must deliver a copy of this Order to each of their board members or owners as well as to any managers, employees, Servicers, or other agents and representatives who have responsibilities related to the subject matter of the Order. 66.
For five (5) years from the Effective Date, Defendants must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section IX, any future board members, executive officers, or owners, as well as to any managers, employees, Servicers, or other agents and representatives who will have responsibilities related to the subject matter of the Order before they assume their responsibilities. 67.
Defendants must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of the E-Sign Act, 15 U.S.C. §§ 7001–31, within thirty (30) days of delivery, from all persons receiving a copy of this Order under this Section.
XI.
Recordkeeping 68.
Defendants must create, or if already created, must retain for at least five (5) years from the Effective Date, the following business records: a.
All documents and records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Bureau.
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b.
All documents and records pertaining to the Redress Plan, described in Section V.
69.
Defendants must retain the documents identified in Paragraph 68 for the duration of the Order.
70.
Defendants must make the documents identified in Paragraph 68 available to the Bureau upon the Bureau’s request. XII. Notices
71.
Unless otherwise directed in writing by the Enforcement Director, Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “In re [name of Respondent], File No. Year-CFPB- ,” and send them either: a.
By overnight courier (not the U.S. Postal Service), as follows: Assistant Director for Enforcement Consumer Financial Protection Bureau ATTENTION: Office of Enforcement 1625 Eye Street, N.W.
Washington D.C. 20006; or
b.
By first-class mail to the below address and contemporaneously by email to [email protected]: Assistant Director for Enforcement Consumer Financial Protection Bureau ATTENTION: Office of Enforcement 1700 G Street, N.W.
Washington D.C. 20552 XIII. Cooperation with the Bureau 72.
Defendants must cooperate fully with the Bureau in this matter and in any investigation related to or associated with the conduct described in the Complaint. Defendants must provide truthful and complete information, Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 36 of 40 PageID #: 58
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evidence, and testimony, and Defendants must cause their officers, employees, representatives, or agents to appear for interviews, discovery, hearings, trials, and any other proceedings that the Bureau may reasonably request upon five (5) days’ written notice, or other reasonable notice, at such places and times as the Bureau may designate, without the service of compulsory process.
XIV. Compliance Monitoring
73.
Within fourteen (14) days of receipt of a written request from the Bureau, Defendants must submit additional Compliance Reports or other requested information, which must be made under penalty of perjury; provide sworn testimony; or produce documents. 74.
Defendants must permit Bureau representatives to interview any employee or other person affiliated with Defendants who has agreed to such an interview. The person interviewed may have counsel present. 75.
Nothing in this Order will limit the Bureau’s lawful use of civil investigative demands under 12 C.F.R. § 1080.6 or other compulsory process.
XV.
Retention of Jurisdiction 76.
The Court will retain jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order. 77.
Notwithstanding the provisions of Paragraph 76, any time limits for performance fixed by this Order may be extended by mutual written agreement of the parties and without further Court approval. Additionally, details related to administration of §§ IX through XIV of this Order may be Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 37 of 40 PageID #: 59
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modified by written agreement of the parties and without further Court approval. Any other modifications to this Order may be made only upon approval of the Court, upon motion by any party. XVI. Administrative Provisions 78.
The Bureau releases and discharges Defendants from all potential liability for law violations that the Bureau has or might have asserted based on the practices described in the Complaint, to the extent such practices occurred before the Effective Date and the Bureau knows about them as of the Effective Date. The Bureau may use the practices described in this Order in future enforcement actions against Defendants and their affiliates, including, without limitation, to establish a pattern or practice of violations or the continuation of a pattern or practice of violations or to calculate the amount of any penalty. This release does not preclude or affect any right of the Bureau to determine and ensure compliance with the Order or to seek penalties for any violations of the Order. 79.
Should Defendants seek to transfer or assign all or part of its operations that are subject to this Order, Defendants must, as a condition of sale, obtain the written agreement of the transferee or assignee to comply with all applicable provisions of this Order.
IT IS SO ORDERED.
Dated:
___________________________
UNITED STATES DISTRICT JUDGE Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 38 of 40 PageID #: 60
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Consented and agreed to:
FOR THE CONSUMER FINANCIAL PROTECTION BUREAU:
ANTHONY ALEXIS Enforcement Director
Deborah Morris Deputy Enforcement Director
/s/ Carolyn Hahn _ Carolyn Hahn (E-mail: [email protected]) (Phone: 202-435-7250 Edward Keefe (E-mail: [email protected]) (Phone: 202-435-9198) 1700 G Street NW Washington, DC 20552 Fax: (202) 435-7722
Attorneys for Plaintiff Consumer Financial Protection Bureau
Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 39 of 40 PageID #: 61
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FOR THE NATIONAL COLLEGIATE STUDENT LOAN TRUSTS
Defendants National Collegiate Student Loan Trusts Waive service and answer of the Complaint and Consent to entry of this Consent Judgment.
/s/ Daniel M. Silver Daniel M. Silver (#4758) MCCARTER & ENGLISH, LLP Renaissance Centre 405 North King Street, 8th Floor Wilmington, DE 19801 (302) 984-6300 [email protected]
/s/ James A. Kosch
JAMES A. KOSCH (E-mail: [email protected]) (Telephone: 973-639-2028) MCCARTER & ENGLISH, LLP Four Gateway Center 100 Mulberry St.
Newark, NJ 07102 Fax (973) 297-3964 Case 1:17-cv-01323-UNA Document 3-1 Filed 09/18/17 Page 40 of 40 PageID #: 62
Amended complaint ()
PDF of this document (22 pages)
Page 58
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
CONSUMER FINANCIAL PROTECTION BUREAU
Plaintiff,
v.
THE NATIONAL COLLEGIATE MASTER STUDENT LOAN TRUST; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2003-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2004-1;
NATIONAL COLLEGIATE STUDENT LOAN TRUST 2004-2; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-2;
NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-3; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-2;
NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-3; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-4; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-1;
NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-2; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-3; and NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-4, Delaware Statutory Trusts,
Defendants.
Case No. 17-1323 (MN)
FIRST AMENDED COMPLAINT FOR PERMANENT INJUNCTION AND OTHER RELIEF
INTRODUCTION 1.
Plaintiff, the Consumer Financial Protection Bureau (“Bureau”), brings Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 1 of 22 PageID #: 10349
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this action against the fifteen (15) National Collegiate Student Loan Trusts (“Defendants,” or “NCSLTs”, or “the Trusts”) under sections 1031(a), 1036(a), 1054(a), and 1055 of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5531, 5536(a), 5564(a), 5565, to obtain permanent injunctive relief, restitution, refunds, disgorgement, damages, civil money penalties, and other appropriate relief for Defendants’ violations of Federal consumer financial law in connection with Defendants’ servicing and collection of private student loan debt. 2.
The Bureau has reviewed the debt-collection and litigation practices of the fifteen Delaware statutory trusts that are Defendants in this action and the practices of Defendants’ agents.
3.
To collect on defaulted private student loans, Defendants’ agents filed collections lawsuits on behalf of Defendants in state courts across the country. In support of these lawsuits, Defendants’ agents executed and filed affidavits that falsely claimed personal knowledge of the account records and the consumer’s debt and, in many cases, personal knowledge of the chain of assignments establishing ownership of the loans. In addition, Defendants’ agents filed at least 2,000 collections lawsuits on Defendants’ behalf either without the documentation necessary to prove Trust ownership of the loans or on debt that was time-barred. Finally, notaries for Defendants’ agents notarized more than 25,000 affidavits even though they did not witness the affiants’ signatures.
JURISDICTION AND VENUE 4.
The Court has subject-matter jurisdiction over this action because it is brought under Federal consumer financial law, 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 2 of 22 PageID #: 10350
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§ 1345.
5.
Venue is proper in this District because Defendants are located and do business in this District. 12 U.S.C. § 5564(f).
PLAINTIFF 6.
The Bureau is an independent agency of the United States charged with regulating the offering and provision of consumer financial products or services under Federal consumer financial laws. 12 U.S.C. § 5491(a). The Bureau has independent litigating authority to enforce Federal consumer financial laws, including the CFPA. 12 U.S.C. §§ 5531(a), 5564(a)–(b).
DEFENDANTS 7.
Defendants are any and all of the fifteen Delaware statutory trusts referred to as the National Collegiate Student Loan Trusts (“NCSLTs” or “the Trusts,” which are the National Collegiate Master Student Loan Trust, NCSLT 2003-1, NCSLT 2004-1, NCSLT 2004-2, NCSLT 2005-1, NCSLT 2005-2, NCSLT 2005-3, NCSLT 2006-1, NCSLT 2006-2, NCSLT 2006-3, NCSLT 2006-4, NCSLT 2007-1, NCSLT 2007-2, NCSLT 2007- 3, and NCSLT 2007-4) and their successors and assigns. 8.
Defendants are “covered person[s]” under the CFPA, 12 U.S.C. § 5481(6).The CFPA defines “covered person” as “any person that engages in offering or providing a consumer financial product or service” and “any affiliate of [such a person] if such affiliate acts as a service provider to such person.” 12 U.S.C. § 5481(6). Defendants are “person[s]” as defined by the CFPA because they are “trust[s]” and, under Delaware law, unincorporated associations. 12 U.S.C. § 5481(19). Defendants offer or provide a “consumer financial product or service” because they engage in “servicing loans, including acquiring, [and] purchasing” loans, which are themselves Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 3 of 22 PageID #: 10351
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extensions of credit that are offered or provided for use by consumers primarily for personal, family, or household purposes, and also engage in the collection of debt related to these extensions of credit. 12 U.S.C. § 5481(5), (15)(A)(i), (x). PROCEEDINGS TO DATE 9.
This action was initially filed by the Bureau on September 18, 2017, along with a proposed consent judgment seeking to settle the Bureau’s claims and a joint motion by the Bureau and Defendants to approve the settlement. The filing of the complaint and settlement was authorized by then Bureau Director Richard Cordray. At the time of filing, the CFPA provided that the Director of the Bureau could be removed from that position by the President of the United States for “inefficiency, neglect of duty, or malfeasance in office.” 12 U.S.C. § 5491(c)(3).
10.
From September 20 to October 10, 2017, seven parties who professed interest in Defendants or the settlement filed motions to intervene in this action. Briefing on the motions to intervene was completed by November 20, 2017. 11.
In November 2017, Director Cordray resigned. From November 28, 2017, until December 17, 2018, the Bureau was headed by an Acting Director appointed to fill the vacancy. The Acting Director, Mick Mulvaney, was removable by the President at will. During the Acting Director’s tenure, the Bureau continued to prosecute this action. 12.
On July 10, 2018, counsel for Defendants moved to withdraw for nonpayment. The Court granted this request on July 16, 2018, and ordered Defendants to retain new counsel within 30 days.
13.
On September 20, 2018, this case was reassigned from Judge Gregory M. Sleet to Judge Maryellen Noreika.
14.
As of the date of reassignment, the initial complaint and motion to Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 4 of 22 PageID #: 10352
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approve the proposed consent judgment had been pending for just over a year, the motions to intervene had been pending for almost a year, Defendants had been without counsel for over two months, and Defendants were more than a month delinquent in complying with the Court’s order to retain new counsel. 15.
On October 19, 2018, the Court granted the motions to intervene. On November 1, 2018, the Court ordered the parties to propose a schedule for briefing the motion to approve the consent judgment and for any related discovery. 16.
On November 16, 2018, in the parties’ joint submission to the Court, the Bureau argued that the Court should schedule briefing on disputed threshold legal issues without permitting the parties to engage in discovery. On November 29, 2018, the Court issued a scheduling order rejecting the Bureau’s argument and permitting discovery on the disputed threshold legal issues. The scheduling order called for discovery to close on February 22, 2019. In fact, discovery on the threshold issues would extend until February 12, 2020.
17.
On December 17, 2018, Kathleen Kraninger, who had been confirmed by the Senate, became the Bureau’s Director, replacing Acting Director Mick Mulvaney. 18.
On December 21, 2018, less than thirty days after entry of the scheduling order, the Bureau served requests for documents on certain Intervenors and served subpoenas for documents on certain third parties regarding the threshold legal issues. From that date until the close of discovery, the Bureau prosecuted this action vigorously, including by litigating numerous discovery disputes. 19.
Briefing on the threshold legal issues related to the proposed consent judgment that had been filed with the Bureau’s original complaint was completed on April 30, 2020. On May 31, 2020, the Court denied the motion to approve the proposed Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 5 of 22 PageID #: 10353
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consent judgment on the ground that the counsel who had executed the settlement on Defendants’ behalf did not have authority to do so. 20.
On June 11, 2020, the Bureau served a summons and the complaint on Defendants via process server. Service was necessary after the Court denied entry of the settlement, which had included a waiver of service. 21.
On June 29, 2020, the Supreme Court issued its ruling in Seila Law, LLC, v. Consumer Financial Protection Bureau, 140 S. Ct. 2183 (2020), holding that the “for cause” removal provision contained in the CFPA was unconstitutional but severable from the rest of the statute.
22.
On July 2, 2020, the Bureau filed an application for entry of default against Defendants for failure to timely answer or respond to the complaint. 23.
On July 10, 2020, certain Intervenors moved to dismiss this action under Rules 12(b)(1) and (6), arguing for the first time that because of the CFPA’s for-cause removal provision, the Bureau lacked authority to file its complaint in September 2017. 24.
On July 17, 2020, the Bureau filed a declaration executed by Director Kraninger ratifying the 2017 filing of this action. 25.
On February 5 and 10, 2021, counsel for Defendants appeared for the first time in the action since July 10, 2018.
DEFENDANTS’ BUSINESS STRUCTURE AND OPERATIONS 26.
The fifteen Defendants were organized between 2001 and 2007 under the Delaware Statutory Trusts Act. Del. Code Ann. tit. 12, § 3801 et seq. 27.
The basic purpose of each Defendant is to acquire a pool of private student loans, to issue notes secured by that pool of student loans, and to service and collect on those student loans.
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28.
The activities and operations Defendants engage in to execute their basic purposes are delineated in a number of agreements, collectively referred to as the Trust- Related Agreements. These agreements include, but are not limited to, for each Trust, a Trust Agreement, an Indenture, an Administration Agreement, and servicing agreements defining how Defendants’ loan servicing and debt collection activities are to be carried out.
29.
Defendants act in their own name. However, they do not act through employees or officers. Instead, Defendants act through entities that are empowered according to relevant Trust-Related Agreements to act in the Trusts’ name. The Trusts also contracted with entities that acted as the Trusts’ agents. 30.
The Trusts explicitly represent and covenant in their Trust Agreements and Indentures that they will act only in their own name. 31.
The Trusts explicitly represent and covenant in their Trust Agreements and Indentures that they will engage in the business of acquiring, owning, and servicing student loans.
32.
The Trusts explicitly represent and covenant in their Indentures that they are responsible for compliance with all Federal laws and regulations applicable to the acquired student loans.
33.
The Trusts explicitly represent in their Indentures that the actions of entities acting within the prescribed authority of relevant Trust-Related Agreements are, legally, the actions of the Trusts themselves. 34.
The Trusts acquired more than 800,000 private student loans from originating lenders.
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35.
The Trusts engage in regular servicing of these student loans through certain designated entities including Intervenor Pennsylvania Higher Education Assistance Agency. In the Indentures, the Trusts explicitly represent that the actions of these entities, acting within the prescribed authority of relevant servicing agreements, are, legally, the actions of the Trusts themselves.
36.
The Trusts also engage in delinquent or default servicing and debt collection activities through certain designated entities, and contract with subservicers to assist in these activities.
37.
Debt collection activities include the filing of debt collection lawsuits filed against allegedly defaulted borrowers. Thousands of debt collection lawsuits have been filed against borrowers whose loans are held or allegedly held by the Trusts since 2012. In these lawsuits the relevant Trust is the named plaintiff in the action. Relevant Trusts are also named as defendants in countersuits or other actions related to the allegedly held debt by borrowers. The relevant Trusts have defended such actions in their own name.
38.
In 2009, the Trusts entered into the Special Servicing Agreement (“SSA”). The SSA appointed a “Special Servicer” to ensure the servicing, collection, and litigation of delinquent and defaulted student loans.
39.
When acting pursuant to the SSA the Special Servicer acts for and represents the Trusts, and the Special Servicer’s actions are deemed to be the actions of the Trusts.
40.
The SSA required that the Trusts, acting through the Special Servicer, hire subservicers to enforce and collect on delinquent and defaulted student loans. Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 8 of 22 PageID #: 10356
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41.
The SSA empowered the Trusts, acting through the Special Servicer, to oversee, supervise, and direct the subservicers. 42.
In 2012, upon the resignation of the Special Servicer and pursuant to the terms of the SSA, the Back-Up Special Servicer, Intervenor US Bank, assumed the role of Special Servicer.
43.
Upon assumption of the role of Special Servicer, the Back-Up Special Servicer became subject to all of the terms and conditions of the SSA. 44.
The SSA required that the Trusts, acting through the Special Servicer, enter into and adhere to the Default Prevention and Collection Services Agreement (“DPCSA”) to engage a “Subservicer” to enforce and collect on delinquent and defaulted student loans.
45.
Under the DPCSA the Trusts, acting through the Special Servicer, had the right to exercise control over the Subservicer by, among other things: a. replacing the Subservicer;
b. directing the means and manner by which the Subservicer engaged in the services it provided under the DPCSA;
c. exercising control over who the Subservicer employed or contracted with to engage in the services it provided under the DPCSA; d. retaining the right to audit the Subservicer’s books and records; e. overseeing the Subservicer’s provision of services under the DPCSA; f. requiring the Subservicer to provide monthly reports on its provision of services under the DPCSA; and Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 9 of 22 PageID #: 10357
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g. maintaining authority over the terms of the operating guidelines that dictated how the Subservicer could engage in collections litigation under the DPCSA.
46.
The DPCSA provides that the Subservicer is engaged for the benefit of the Trusts, including by providing that:
a. the Subservicer agrees to take no action that would damage the reputation of the Trusts;
b. the Subservicer agrees to disclose that it is acting in a representative capacity on behalf of the Trusts when hiring counsel to engage in debt collections litigation, and when preparing any document in support of debt collections litigation filed for the Trusts’ benefit; c. the Subservicer is appointed to maintain records on the Trusts’ behalf; d. the Subservicer is compensated for its services under the DPCSA by the Trusts; and e. the Subservicer deposits money collected as a result of its services under the DPCSA into accounts maintained for the Trusts’ benefit. 47.
As of March 1, 2009, the Subservicer appointed by the DCPSA was NCO Financial Systems, Inc.
48.
Since November 1, 2014, the Subservicer appointed by the DPCSA, as amended, has been Intervenor Transworld Systems, Inc. 49.
Pursuant to its obligations to the Trusts under the DPCSA, the Subservicers executed and notarized deceptive affidavits and caused them to be filed in debt collection actions brought on behalf of the Trusts. Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 10 of 22 PageID #: 10358
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50.
Pursuant to its obligations to the Trusts under the DPCSA, the Subservicers filed or caused to be filed collections lawsuits lacking documentation needed to prove ownership of the loans.
FALSE AND MISLEADING AFFIDAVITS AND TESTIMONY 51.
In connection with collecting or attempting to collect debt from consumers, between November 1, 2012, and April 25, 2016, the Subservicers, acting on behalf of Defendants, initiated 94,046 collections lawsuits in courts across the country. 52.
In each of these collections lawsuits, the relevant Defendant that purported to own the subject student loan was listed as the named plaintiff. 53.
In support of the collections lawsuits, the Subservicers acting on behalf of Defendants submitted affidavits and documents in support of Defendants’ claims that consumers owed debts to Defendants.
54.
The Subservicers’ affiants executed and notarized affidavits on behalf of Defendants, and caused those affidavits to be filed—often attaching exhibits—in Defendants’ collections lawsuits.
55.
In these affidavits, the affiants swore that they had personal knowledge of the student loan records evidencing the debt.
56.
In fact, in numerous instances, affiants lacked personal knowledge of the student loan records evidencing the debt when they executed the affidavits. 57.
The affiants also swore in the affidavits that they were authorized and competent to testify about the consumers’ debts through review of and “personal knowledge” of the business records, including electronic data, in their possession. Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 11 of 22 PageID #: 10359
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58.
In fact, in numerous instances, affiants lacked personal knowledge of the business records, including the electronic data, showing that consumers owed debts to Defendants.
59.
Affiants were instructed to review data on a computer screen to verify information in the affidavits about the debts. Affiants, however, did not know the source of the data on that screen, how the data was obtained or maintained, whether it was accurate, or whether those data meant that the debt was in fact owed to Defendants. 60.
Each affiant also swore that he or she had “personal knowledge of the record management practices and procedures of Plaintiff [the Trust] and the practices and procedures Plaintiff requires of its loan servicers and other agents.” 61.
In fact, affiants lacked personal knowledge of the record management practices and procedures of Defendants or the practices and procedures of the entities through which Defendants acted.
62.
In many affidavits, the affiants also swore, “I have reviewed the chain of title records as business records” regarding the relevant account. 63.
In fact, in numerous instances, affiants did not review the chain of assignment records prior to executing the affidavits. In some cases, affiants reviewed only “chain of title” records that had been found online. In fact, the Subservicers instructed affiants that they did not need to review the chain of assignment records before executing affidavits that represented that the affiant had reviewed those records. 64.
In fact, affiants did not have access to deposit and sale agreements—the last link in the chain of assignment transferring loans into the Trust—until May 30, 2014.
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65.
In many affidavits, the affiants asserted that they had personal knowledge that the loans were transferred, sold, and assigned to the Trusts on dates certain. 66.
In fact, affiants lacked personal knowledge of the chain of assignment records necessary to prove that the relevant Trust owned the subject loan. 67.
In some instances, when affiants complained to management that they did not have personal knowledge of certain representations made in the affidavits, the Subservicers instructed the affiants to continue signing the affidavits. In some instances, affiants felt “bullied” by management and followed the instructions for fear of losing their jobs.
68.
On numerous occasions, to address a backlog of affidavits, employees of the Subservicers such as interns and mailroom clerks were instructed to execute affidavits.
69.
On numerous occasions, between November 1, 2012, and September 1, 2013, the Subservicer filed stale affidavits that had earlier been executed by a previous entity. Contrary to the statements in the affidavits, the affiants in question were no longer “authorized to testify” in the matter and no longer had access to or knowledge of the consumer’s account records or debt.
70.
Affiants also later provided live testimony in court, purportedly based on personal knowledge, similar to the statements made in the affidavits as described in Paragraphs 55–66.
IMPROPERLY NOTARIZED AFFIDAVITS 71.
Between November 1, 2012, and August 3, 2014, in connection with collecting or attempting to collect debt from consumers, Defendants’ Subservicers acting on behalf of Defendants filed at least 11,412 affidavits in collections lawsuits. Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 13 of 22 PageID #: 10361
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72.
Between November 1, 2012, and August 3, 2014, Defendants’ Subservicer acting on behalf of Defendants improperly notarized virtually every affidavit executed and filed.
73.
Affiants executed the affidavits outside the presence of the notary. 74.
Affiants placed executed affidavits in a specified location. 75.
Defendants’ Subservicers’ notaries later notarized stacks of previously signed affidavits all at once at their desks. 76.
Contrary to the representations in the affidavits, affiants did not personally appear before notaries.
77.
Contrary to the representations in the affidavits, notaries did not place the affiants under oath or witness their signatures. 78.
On numerous occasions, notaries notarized affidavits executed by affiants on a prior date. At least one of Defendants’ Subservicers instructed notaries to ensure that the notarization date matched the date of execution, even if that meant backdating the notarization date.
79.
In many cases, the notaries did in fact back date their notarization of the affidavits.
FILING LAWSUITS WITHOUT THE INTENT OR ABILITY TO PROVE THE CLAIMS, IF CONTESTED
80.
Defendants filed at least 1,214 collections lawsuits against consumers even though the documentation needed to prove they owned the loans was missing. Through Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 14 of 22 PageID #: 10362
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these lawsuits, Defendants obtained approximately $21,768,807 in judgments against consumers.
81.
In these lawsuits, documentation of a complete chain of assignment evidencing that the subject loan was transferred to Defendants was missing. 82.
In addition, Defendants filed at least 812 collections lawsuits where the documentation did not support the Trusts’ ownership of the loans. The chain of assignment documentation shows that these loans were allegedly transferred to Defendants before they were in fact disbursed to consumers. 83.
In at least 208 other collections lawsuits, the promissory note to prove that a debt was owed did not exist or could not be located. 84.
For each collections lawsuit described in Paragraphs 80-83, Defendants could not prove that a debt was owed to Defendants, if contested. 85.
Defendants knew, or their processes should have uncovered, that these chain of assignment documents were missing or flawed, yet Defendants continued to file collections lawsuits.
COLLECTION OF TIME-BARRED DEBT 86.
In at least 486 collections lawsuits, in connection with collecting or attempting to collect debt from consumers, Defendants filed a collections lawsuit outside the applicable statute of limitations. 87.
In numerous instances, in connection with collecting or attempting to collect debt, Defendants represented to consumers, directly or indirectly, expressly or by implication, including by the filing of collections lawsuits itself, that the Trusts had a legal right to obtain judgment through their collections lawsuits. Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 15 of 22 PageID #: 10363
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THE CONSUMER FINANCIAL PROTECTION ACT 88.
The CFPA provides that it is unlawful for any covered person “to offer or provide to a consumer any financial product or service not in conformity with Federal consumer financial law, or otherwise commit any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A). The CFPA grants the Bureau authority to commence a civil action against any person who violates a Federal consumer financial law, such as the CFPA. 12 U.S.C. § 5564(a). VIOLATIONS OF THE CFPA 89.
The CFPA prohibits a covered person from committing or engaging in any “unfair, deceptive, or abusive act or practice” in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. 12 U.S.C. §§ 5531, 5536(a)(1)(B). 90.
Servicing loans and collecting debt are “consumer financial products or services” under the CFPA. 12 U.S.C. § 5481(15)(A)(i), (x). DECEPTIVE ACTS OR PRACTICES COUNT I False and Misleading Affidavits and Testimony 91.
The Bureau incorporates the allegations in Paragraphs 1–70 by reference. 92.
In numerous instances, in connection with collecting or attempting to collect debt, Defendants represented to consumers, directly or indirectly, expressly or by implication, that affiants or witnesses in court had personal knowledge of the student loan records evidencing the debt.
93.
In fact, in numerous instances those representations were false because affiants and witnesses lacked personal knowledge of the student loan records evidencing Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 16 of 22 PageID #: 10364
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the debt when they executed the affidavits.
94.
In numerous instances, Defendants represented to consumers, directly or indirectly, expressly or by implication, that affiants and witnesses had personal knowledge of the record management practices and procedures of the Trusts and the practices and procedures of the entities through which the Trusts acted. 95.
In fact, in numerous instances those representations were false because affiants and witnesses lacked personal knowledge of the record management practices and procedures of the Trusts and the practices and procedures of the entities through which the Trusts acted.
96.
In numerous instances, Defendants represented to consumers, directly or indirectly, expressly or by implication, that affiants and witnesses had reviewed the chain of title records and asserted that they had personal knowledge that the loans were transferred, sold, and assigned to the Trusts on dates certain. 97.
In fact, in numerous instances those representations were false because, affiants and witnesses had not reviewed the chain of title records and lacked personal knowledge that the loans were transferred, sold and assigned to the Trusts. 98.
Defendants’ false representations set forth in Paragraphs 92–97 are material and likely to mislead consumers acting reasonably under the circumstances. 99.
Defendants’ false representations set forth in Paragraphs 92-97 constitute deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531, 5536(a)(1)(B). COUNT II Improperly Notarized Affidavits 100. The Bureau incorporates the allegations in Paragraphs 1–50 and 71—79 by Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 17 of 22 PageID #: 10365
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reference.
101.
In numerous instances, in connection with collecting or attempting to collect debt, Defendants represented to consumers, directly or indirectly, expressly or by implication, that the affidavits submitted in support of their collections lawsuits were properly sworn and executed before a notary.
102.
In fact, in numerous instances those representations were false because the affidavits were unsworn and executed outside the presence of a notary. 103.
Defendants’ false representations set forth in Paragraphs 101–102 are material and likely to mislead consumers acting reasonably under the circumstances. 104.
Defendants’ false representations set forth in Paragraph 101–102 constitute deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531, 5536(a)(1)(B).
COUNT III Filing Lawsuits without the Intent or Ability to Prove the Claims, if Contested
105.
The Bureau incorporates the allegations in Paragraphs 1–50 and 80-85 by reference.
106.
In numerous instances, in connection with collecting or attempting to collect debt, Defendants represented to consumers, directly or indirectly, expressly or by implication, that collections lawsuits were supported by valid and reliable legal documentation needed to obtain judgment.
107.
In fact, in connection with numerous lawsuits, those representations were false because documentation of a complete chain of assignment evidencing that the subject loan was transferred to Defendants was missing. Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 18 of 22 PageID #: 10366
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108. In fact, in connection with numerous lawsuits, those representations were false because a promissory note proving the existence of the debt was missing. 109.
In fact, in connection with numerous lawsuits, those representations were false because the Trusts could not prove their claims, if contested. 110.
Defendants’ false representations set forth in Paragraphs 106–109 are material and likely to mislead consumers acting reasonably under the circumstances. 111.
Defendants’ false representations set forth in Paragraph 106–109 constitute deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531, 5536(a)(1)(B).
COUNT IV Collection of Time-Barred Debt 112.
The Bureau incorporates the allegations in Paragraphs 1–50 and 86-87 by reference.
113.
In numerous instances, in connection with collecting or attempting to collect debt, Defendants represented to consumers, directly or indirectly, expressly or by implication, that the Trusts had a legal right to obtain judgment through their collections lawsuits.
114.
In fact, in numerous instances those representations were false because the statute of limitations on these loans had expired. 115.
Defendants’ false representations set forth in Paragraphs 113–114 are material and likely to mislead consumers acting reasonably under the circumstances. 116.
Defendants’ false representations set forth in Paragraph 113–114 constitute deceptive acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531, 5536(a)(1)(B).
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UNFAIR ACTS OR PRACTICES COUNT V Filing Lawsuits without the Intent or Ability to Prove the Claims, if Contested
117.
The Bureau incorporates the allegations in Paragraphs 1–50 and 80-85 by reference.
118.
Under section 1031 of the CFPA, an act or practice is unfair if it causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers, and such substantial injury is not outweighed by countervailing benefits to consumers or to competition. 12 U.S.C. §§ 5531(c), 5536(a)(1)(B). 119.
In numerous instances, in connection with collecting or attempting to collect debt through collections lawsuits, Defendants filed collections lawsuits without the intent or ability to prove the claims, if contested. 120.
Defendants’ acts or practices have caused or were likely to cause substantial injury to consumers, estimated to be at least $3.5 million in payments made in connection with these lawsuits.
121.
Consumers could not reasonably avoid the harm, and the harm was not outweighed by countervailing benefits to consumers or competition. 122.
Defendants’ acts or practices set forth in Paragraph 119–121 constitute unfair acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531(c), 5536(a)(1)(B). CONSUMER INJURY 123.
Consumers have suffered or were likely to suffer substantial injury as a result of Defendants’ violations of the CFPA. In addition, Defendants have been unjustly Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 20 of 22 PageID #: 10368
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enriched as a result of their unlawful acts or practices. THIS COURT’S POWER TO GRANT RELIEF 124.
The CFPA empowers this Court to grant any appropriate legal or equitable relief including, without limitation, a permanent or temporary injunction, rescission or reformation of contracts, the refund of moneys paid, restitution, disgorgement or compensation for unjust enrichment, payments of damages or other monetary relief, limits on the activities or functions of Defendants, and civil money penalties. 12 U.S.C. § 5565(a). In addition, the CFPB may recover its costs in connection with the action, if it is the prevailing party. 12 U.S.C. § 5565(b). DEMAND FOR RELIEF 125.
Wherefore, the Bureau requests that the Court: a. Permanently enjoin Defendants from committing future violations of the CFPA;
b. Grant additional injunctive relief as the Court may deem to be just and proper;
c. Award such relief as the Court finds necessary to redress injury to consumers resulting from Defendants’ violations of the CFPA, including, but not limited to, rescission or reformation of contracts, the refund of moneys paid, restitution, disgorgement or compensation for unjust enrichment, and payment of damages or other monetary relief; d. Award the Bureau civil money penalties; and e. Award the Bureau the costs of bringing this action, as well as such other Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 21 of 22 PageID #: 10369
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and additional relief as the Court may determine to be just and proper.
Dated: April 30, 2021
Respectfully submitted,
Cara M. Petersen Acting Enforcement Director
Deborah Morris Deputy Enforcement Director
/s/ Gabriel Hopkins _ Gabriel Hopkins (E-mail: [email protected]) (Phone: 202-435-7842 Stephen Jacques (E-mail: [email protected]) (Phone: 202-435-7368) Tiffany Hardy (E-mail: [email protected]) (Phone: 202-435-9375) Enforcement Attorneys Consumer Financial Protection Bureau 1700 G Street NW Washington, DC 20552 Telephone: (202) 435-9198 Facsimile: (202) 435-7722
For the Consumer Financial Protection Bureau
Case 1:17-cv-01323-MN Document 362 Filed 04/30/21 Page 22 of 22 PageID #: 10370
Opinion ()
PDF of this document (39 pages)
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Case: 22-1864 Document: 104 Page: 1 Date Filed: 03/19/2024
PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
No. 22-1864
CONSUMER FINANCIAL PROTECTION BUREAU
V.
NATIONAL COLLEGIATE MASTER STUDENT LOAN TRUST; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2003-1; NATIONAL COLLEGIATE STUDENT
LOAN TRUST 2004-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2004-2; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-2; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-3; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-2; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-3;
NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-4; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-1; NATIONAL COLLEGIATE STUDENT
LOAN TRUST 2007-2; NATIONAL COLLEGIATE
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Case: 22-1864 Document: 104 Page:2 Date Filed: 03/19/2024
STUDENT LOAN TRUST 2007-3; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-4, Delaware Statutory Trusts
NATIONAL COLLEGIATE MASTER STUDENT LOAN TRUST; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2003-1; NATIONAL COLLEGIATE STUDENT
LOAN TRUST 2004-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2004-2; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-2; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-3; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-2; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-3; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-4; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-1; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-2; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-3; NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-4; AMBAC ASSURANCE CORPORATION; TRANSWORLD SYSTEMS INC,
Appellants
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Case: 22-1864 Document: 104 Page:3 Date Filed: 03/19/2024
Appeal from the United States District Court
for the District of Delaware (D.C. Civil Action No. 1-17-cv-01323) Circuit Judge: Honorable Stephanos Bibas!
Argued on May 17, 2023
Before: RESTREPO, ROTH and McKEE, Circuit Judges
(Opinion filed: March 19, 2024)
Seth Frotman
Steven Y. Bressler
Kevin E. Friedl (ARGUED) Kristin Bateman
Consumer Financial Protection Bureau
1700 G Street NW
Washington, DC 20552
Counsel for Appellee Consumer Financial Protection Bureau
Jonathan Y. Ellis (ARGUED) McGuireWoods LLP
500 Fayetteville Street
Suite 500
Raleigh, NC 27061
' Honorable Stephanos Bibas, United States Court of Appeals Judge for the Third Circuit Court of Appeals, sitting by designation.
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Case: 22-1864 Document: 104 Page:4 Date Filed: 03/19/2024
Nicholas J. Giles McGuire Woods LLP Gateway Plaza
800 East Canal Street Richmond, VA 23219
Francis J. Aul
McGuire Woods LLP
888 16" Street, NW
Black Lives Matter Plaza, Suite 500 Washington, DC 20006
Megan Ix Brison
Michael A. Weidinger
Pinckney Weidinger Urban & Joyce 2 Mill Road
Suite 204
Wilmington, DE 19806
Counsel for Appellants
Rebecca L Butcher Jennifer L. Cree
Landis Rath & Cobb
919 Market Street
Suite 1800, P.O. Box 2087 Wilmington, DE 19801
Counsel for Intervenor Appellant GSS Data Services LLC
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Case: 22-1864 Document:104 Page:5 Date Filed: 03/19/2024
Joshua A Kipnees
George A. LoBiondo
Patterson Belknap Webb & Tyler 1133 Avenue of the Americas New York, NY 10036
Counsel for Intervenor Appellant Ambac Assurance Corp
Allyson B. Baker Meredith L. Boylan Sameer P. Sheikh
Paul Hastings
2050 M Street NW Washington, DC 20036
Counsel for Intervenor Appellant Transworld Systems Inc
Stephen M. Nickelsburg Clifford Chance US 2001 K Street NW Washington, DC 20006
Counsel for Amicus Appellant Chamber of Commerce of the United States of America and Securities Industry and Financial Markets Association
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Case: 22-1864 Document:104 Page:6 Date Filed: 03/19/2024
R. Trent McCotter George Mason University 3301 Fairfax Drive Arlington, VA 20001
Counsel for Amicus Appellant Separation of Powers Clinic
Ellen V. Hollman Cadwalader Wickersham & Taft 200 Liberty Street
One World Financial Center New York, NY 10281
Rachel Rodman
Cadwalader Wickersham & Taft 700 Sixth Street NW Washington, DC 20001
Counsel for Amicus Appellant Structured Finance Association
Sarah A. Hunger
Office of Attorney General of Illinois Solicitor General’s Office
115 S LaSalle Street
234 Floor
Chicago, IL 60603
Counsel for Amicus Appellees State of Illinois, State of California, State of Colorado, State of Connecticut, State of Delaware District of Columbia, State of
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Case: 22-1864 Document:104 Page:7 Date Filed: 03/19/2024
Hawaii, State of Idaho, State of Maine, State of Maryland, State of Massachusetts, State of Michigan, State of Minnesota, State of Nevada, State of New Jersey, State of New Mexico, State of New York, State of North Carolina, State of Oregon, State of Rhode Island, State of Commonwealth of Virginia, State of Washington and State of Wisconsin
Benjamin J. Roesch Jensen Morse Baker 1809 Seventh Avenue Suite 410
Seattle, WA 98101
Counsel for Amicus Appellees Student Borrower Protection Center, Community Legal Aid Society Inc, Community Legal Services Inc, New York Assistance Group and New Jersey Citizen Action
OPINION
Page 87
Case: 22-1864 Document:104 Page:8 Date Filed: 03/19/2024
ROTH, Circuit Judge:
The issues before the Court on this interlocutory appeal are whether the Trusts are covered persons subject to the Consumer Financial Protection Act (CFPA), and whether the Consumer Financial Protection Bureau (CFPB) was required to ratify the underlying action. As a result of our review of the case, we will remand it to the District Court with our answers to the two questions certified.
I. BACKGROUND
A. Formation and Obligations of the Trusts
Between 2003 and 2007 there was a massive uptick in securitized assets.” Part of this increase in securitization was the privatization of student loans.* During this period, the fifteen appellant trusts (the Trusts), which are “offshoots of the National Collegiate Student Loan Master Trust,” were formed “for the narrow purpose of acquiring and servicing a sizable
? See Sergei Chernenko et al., The Rise and Fall of Demand for Securitizations, HARVARD BUSINESS SCHOOL, | (2014), https://www.hbs.edu/ris/Publication%20Files/The%20Rise% 20and%20Fall%200f%20Demand%20for%20Securitizations _26afb79a-342c-42d6-9b8e- 1 84c0b9ec2 f4.pdf.
3 See id. at 5.
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portfolio of student loans.”4 Indeed, the Trusts have since
amassed over eight hundred thousand private loans.°
“At their formation, each of the 15 Trusts and the Owner Trustee executed a Trust Agreement governed by Delaware law.” This agreement defined the purpose of the Trusts.’ Under the agreement, because the Trusts have no employees, the Owner Trustee “is empowered to ‘act on behalf of the Trust[s]."’"> One way to do so is by entering into Administration Agreements.’ “(T]he Administration Agreements make clear the Administrator will ‘perform’ the ‘duties of the [Trusts]’ as well as ‘the duties and obligations of the Owner Trustee on behalf of the [Trusts] under . . . the Trust Agreement.’”!° Therefore, “Administration Agreements . . . play a pivotal role in the overall structure of the securitization transaction.”!!
4 In re Nat’l Collegiate Student Loan Trusts Litig., 251 A.3d 116, 127 (Del. Ch. 2020) (hereinafter Jn Re NCLST).
> CFPB y. Nat'l Collegiate Master Student Loan Trust, 575 F. Supp. 3d 505, 506 (D. Del. 2021), motion to certify appeal granted, No. 1:17-CV-1323-SB, 2022 WL 548123 (D. Del. Feb. 11, 2022) (hereinafter CFPB II).
® In Re NCLST, 251 A.3d at 132. There is no discernable difference between the Trusts in Jn Re NCLST and the Trusts from CFPB II.
1 See infra note 105.
8 In Re NCLST, 251 A.3d at 131 (alteration in original).
? See id.
10 Td. at 140 (quoting JA150).
'l Td. at 133.
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Part of the role played by the Administrator is contracting with third parties through Servicing Agreements. '* “[Flor each Trust, the Administrator contracted with a [Special] Servicer (or a similar entity) in a Servicing Agreement. In that agreement, the Servicer promised to ‘provide and perform’ certain services such as ‘[b]orrower communications,’ ‘[p]rocedures for delinquency and default,’ and ‘[d]isbursement.’”!? The Special Servicer, would, in turn, contract with subservicers that would “conduct[] collections” and “oversee[] . . . collection lawsuits against borrowers in the name of the Trusts.”!4 As such, in each suit, one of the Trusts was the named plaintiff and the primary beneficiary of any action in which it prevailed."
In 2014, after noticing the practices of the Trusts and those acting on their behalf, the CFPB issued a civil investigative demand (CID) to each Trust for information on collections lawsuits brought against borrowers for defaulted
12 Td. at 141.
'3 Td. at 141 (alterations in original) (footnote omitted).
‘4 CFPB II, 575 F. Supp. 3d at 506-07 (alterations in original). 'S See Amici Br. Student Borrower Protection Center at 15 (stating that, in California, “every time” a suit was brought against a delinquent debtor, the creditor was represented by counsel) (citing Mark Huelsman, The Debt Divide: The Racial and Class Bias Behind the “New Normal” of Student Borrowing, DEMOS (2015), https://www.demos.org/publication/debt-divide-racial-andclass-bias-behind-new- normal-student-borrowing).
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student loans.'° In 2017, the CFPB initiated enforcement proceedings against the Trusts.!’ The parties reached a
settlement and asked the court to enter a consent decree. The court declined to do so.!® The CFPB then filed this action. !®
B. Precedential Developments and Their Effect on the Instant Matter
While the case was proceeding through the District Court, the Supreme Court issued two relevant opinions. The first was Seila Law LLC v. Consumer Financial Protection Bureau.”° There, the Court addressed 12 U.S.C. § 5491(c), the statute establishing the CFPB and its Director. According to the statute, the Director may be removed by the President only “for cause.””! However, the Constitution dictates that agency heads must be freely removable by the President.”” The Court
'6 CFPB y. Nat’l Collegiate Master Student Loan Tr., No. CV 17-1323 (MN), 2021 WL 1169029, at *2 (D. Del. Mar. 26, 2021) (hereinafter CFPB J); JA367 (same); NCMSLT Br. at 14.
7 CFPB I, 2021 WL 1169029, at *2.
'8 CFPB IT, 575 F. Supp. 3d at 507.
') CFPB I, 2021 WL 1169029, at *2; JA367.
70 140 S. Ct. 2183 (2020).
7112 U.S.C. § 5491(c)(3).
22 See Bowsher v. Synar, 478 U.S. 714, 726 (1986) (stating that executive officials “must fear and, in the performance of [their] functions, obey” (quotation omitted)). Even though this removal power is not without limit, “[t]he parties do not ask us to reexamine any of these [limits], and [thus] we do not do so.” Free Enter. Fund v. Pub. Co. Acct. Oversight Bd., 561 U.S. 477, 483 (2010).
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held that the CFPB’s removal provision unconstitutionally insulated the Director of the CFPB from the president’s removal authority because “the CFPB’s leadership by a single individual removable only for inefficiency, neglect, or malfeasance violates the separation of powers.”
When an unconstitutional “provision violates the separation of powers it inflicts a ‘here-and-now’ injury on affected third parties that can be remedied by a court.”*4 The Court then evaluated 12 U.S.C. § 5491(c)(3) within the broader context of the Dodd-Frank Act.”> It noted that “i]t has long been settled that ‘one section of a statute may be repugnant to the Constitution without rendering the whole act void.’””° “Generally speaking, when confronting a constitutional flaw in a statute, we try to limit the solution to the problem, severing
3 Seila Law LLC, 140 S. Ct. at 2197. There was also a secondary basis for this decision: that the Director would be appointed every five years, and so a sitting President may not have the opportunity to appoint the agency head. Jd. at 2204. This is why the opinion refers to the Director as being “insulated by two layers of for-cause removal protection.” Jd. at 2198. However, because the parties focus purely on the fact that the Director was unconstitutionally insulated because he could only be removed for cause, there is no need to address this secondary ground discussed in Seila Law.
4 Td. at 2196 (citing Bowsher, 478 U.S., at 727 n.5).
5 Id. at 2207, 2209. The CFPA is contained within the Dodd- Frank Act. Because the parties do not discuss Dodd-Frank outside the confines of the CFPA, the two terms may be used interchangeably.
26 Td. at 2208 (quoting Loeb v. Columbia Twp. Trs., 179 U.S. 472, 490 (1900)).
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any problematic portions while leaving the remainder intact.’
Therefore, “[w]hen Congress has expressly provided a severability clause, [a court’s] task is simplified.”’® Because “Tt]he only constitutional defect [the Court] identified in the CFPB’s structure is the Director’s insulation from removal . . . . [the Court] must therefore decide whether the removal provision can be severed from the other statutory provisions relating to the CFPB’s powers and responsibilities.””’
The Dodd-Frank Act itself, which contains the CFPA, includes the following provision: “If any provision of this Act . or the application of such provision . . . is held to be unconstitutional, the remainder of this Act, the amendments made by this Act, and the application of the provisions of such to any person or circumstance shall not be affected thereby.’*° Thus, because Dodd-Frank has an express severability clause, “Tt]here is no need to wonder what Congress would have wanted if ‘any provision of this Act’ is ‘held to be unconstitutional.’ Congress has told us: ‘the remainder of this Act’ shall ‘not be affected.’”>! The Court found there to be no support for the notion that “Congress would have preferred no CFPB to a CFPB supervised by the President.”3* The Court
27 Id. at 2209 (quoting Free Enter. Fund, 561 U.S. at 508)); see id. at 2208 (“If the removal restriction is not severable, then we must grant the relief requested, promptly rejecting the demand outright.”’).
28 Td.
29 Td.
3°12 U.S.C. § 5302.
3! Seila Law, 140 S. Ct. at 2209 (quoting 12 U.S.C. § 5302). >? Td.
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concluded that “[t]he provisions of the Dodd-Frank Act bearing on the CFPB’s structure and duties remain fully operative without the offending tenure restriction.”
The Supreme Court then severed 12 U.S.C. § 5491(c), and remanded the action “to determine what to do about a petition to enforce a CID that the Bureau had filed while its structure was unconstitutional.”*+ This conformed with the law at the time that constitutional defects had to be cured by ratification,> and “the party ratifying should be able not merely to do the act ratified at the time the act was done, but also at the time the ratification was made.”*° The court concluded that, if the CFPB Director did not effectively ratify the underlying suit, the petition had to be dismissed.*’
Turning to the case before us, the Trusts moved to dismiss the CFPB’s complaint on several grounds.** However, the District Court felt it “need only address two” of those grounds:*’ first, whether the Trusts were “covered persons”
33 Td.
34 CFPB I, 2021 WL 1169029, at *4.
38 Td.
36 Advanced Disposal Serv. E., Inc. v. N.L.R.B., 820 F.3d 592, 603 (3d Cir. 2016).
37 Td. Ratification will be discussed in more depth below.
38 More specifically, there were several entities that intervened in this matter, and they moved to dismiss in the wake of Seila Law. The Trusts joined the intervenors’ motion to dismiss. CFPB I, 2021 WL 1169029, at *3.
3° Id. at *3. These are, in essence, the two grounds in this appeal.
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subject to the CFPA;*? second, whether the suit had to be ratified because the action was initiated while there was a constitutional deficiency within the agency. The contention was that this suit was ratified after the statute of limitations had run and thus was untimely.*!
The District Court agreed that the suit was untimely.” Relying on our opinion in Advanced Disposal, it concluded that “ratification is, in general, not effective when it takes place after the statute of limitations has expired.”*> The CFPB Director ratified the action more than three years after the date of discovery of these violations.“4 The District Court also rejected the CFPB’s alternative argument that the statute of limitations be equitably tolled. The court found that the bureau did not “diligent[ly] pursu[e] . . . its rights” during the relevant period because “the Bureau was (as it should have been) acutely aware that there was doubt over the constitutionality of its enforcement authority.”*
40 See id.
41 Td.; see 12 U.S.C. 5564(g)(1) (stating that “no action may be brought... more than 3 years after the date of discovery of the violation to which an action relates”).
” The District Court did not thoroughly address whether the Trusts were “covered persons” under the CFPA, but it did “harbor[ ] some doubt” that they were. CFPB J, 2021 WL 1169029, at *3.
8 CFPB I, 2021 WL 1169029, at *5 (citing Benjamin v. V.I. Port Authority, 684 F. App’x 207, 212 (3d Cir. 2017)).
4 Td.
4 Td. at *6.
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With the court’s leave, the CFPB filed an amended complaint. The CFPB’s amended complaint emphasized that the Trusts are “covered persons” who “engage in” debt collection and are thus subject to the CFPA.*° Again, the Trusts and several intervenors moved to dismiss, arguing that they are not “covered persons” under the statute and that the suit was untimely. *”
Before the District Court decided these motions, the Supreme Court issued a new opinion, in Collins v. Yellen.*® There, the Court was facing a situation similar to that in Seila Law. The underlying suit was brought against the Federal Housing Finance Authority (FHFA) on the ground that the FHFA Director was impermissibly insulated from the President’s removal authority because he could only be removed for cause.” Because of this, the Shareholders argued that agency enforcement actions made while the FHFA Director was impermissibly insulated were void ab initio.°°
The Court made quick work of the insulation issue. It found its decision in Seila Law to be “all but dispositive”: “[a] straightforward application of [the] reasoning in Seila Law” required the Court to conclude that a for-cause restriction on the President’s removal power violates separation of powers.*!
46 JA383-84.
4” CFPB IT, 575 F. Supp. 3d at 507.
48 141 S, Ct. 1761 (2021).
4 Td. at 1784.
°° Td. at 1787.
>! Td. at 1783-84. Though there are obviously some differences between the CFPB and the FHFA, the Court did not “find any
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However, unlike in Seila Law, the Court also addressed the question of whether the actions of agency heads lacking constitutional authority were void ab initio.°? At the outset, it noted that “there is no basis for concluding that any head of the FHFA lacked the authority to carry out the functions of the office.”*? The Court concluded that whether agency action was void ab initio came down to whether an agency director was properly appointed.** More particularly, the Court held:
All the officers who headed the FHFA during the time in question were properly appointed. Although the statute unconstitutionally limited the President’s authority to remove the confirmed Directors, there was no constitutional defect in the statutorily prescribed method of appointment to that office. As a result, there is no reason to regard any of the actions taken by the FHFA... as void.>>
of these distinctions sufficient to justify a different result.” Jd. at 1784.
>? Td. at 1787.
°3 Id. at 1788 (citing Seila Law, 140 S. Ct. at 2207-11).
4 Td. at 1787. There is no support for the notion that any CFPB director was improperly appointed, and neither party argues this point. See JA15 (stating that “the Bureau’s director was properly appointed”’).
°° Collins, 141 S. Ct. at 1787.
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In so holding, the Court rejected the claim that agency actions are void unless “ratified by an Acting Director who was removable at will by the President.”>°
The Court further clarified that actions taken by an improperly insulated director are not “void” and do not need to be “ratified” unless a plaintiff can show that the removal provision harmed him.*’ “[P]laintiffs alleging a removal violation are entitled to injunctive relief—a rewinding of agency action—only when the President’s inability to fire an agency head affected the complained-of decision.”** In other words, if there is no harm derived from the President’s inability to remove the agency head, then the agency action will not be unwound.°?
Because in Seila Law there was a “dispute [about] the possibility that the unconstitutional removal restriction caused any such harm,” the Court held that such disputes should be resolved by the lower courts and remanded the action to the
6 Id. In Collins, the petitioning shareholders argued that an unconstitutionally insulated “Director’s action would be void unless lawfully ratified,” id. at 1788, based on the fact that the Court in Seila Law remanded “to consider whether the civil investigative demand was validly ratified,” Seila Law, 140 S. Ct. at 2211. However, the Court in Collins noted that it never mentioned “whether ratification was necessary” when agency action was taken at the behest of an unconstitutionally insulated agency director. Collins, 141 at 1788.
°7 Id. at 1788-89.
°8 Td. at 1801 (Kagan, J., concurring in part).
»? Td.
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court of appeals.®’ In so doing, the Court in Collins extended the rule established in Seila Law to permit consideration of harm and, as a result of doing so, to determine if the agency action had to be rewound.
Against this backdrop of Collins and Seila Law, the District Court considered the underlying action. It addressed two questions: whether the CFPB needed to ratify this action (which necessarily addresses the suit’s timeliness) and whether the Trusts were “covered persons” under the CFPA.°! Based on Collins, the District Court held that the agency head was properly appointed, and that the agency would have filed the action regardless of the President’s ability to remove the agency head. More particularly, it held:
This suit would have been filed even if the director had been under presidential control. It has been litigated by five directors of the CFPB, four of whom were removable at will by the President. And the CFPB did not change its litigation strategy once the removal protection was eliminated. This is strong evidence that this suit would have been brought regardless. Thus, the CFPB’s initial decision to bring this suit was not ultra vires.
6° Td. at 1789; see, e.g., id. at 1795 (Thomas, J., concurring) (“The Fifth Circuit can certainly consider this issue on remand.’’); id. at 1802 (Kagan, J., concurring in part) (stating that the “Court of Appeals already considered and decided the issue remanded’).
6! See CFPB II, 575 F. Supp. 3d at 506.
6 Td. at 508 (citation omitted).
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This conclusion resolved the first question.
The District Court then considered whether the Trusts were “covered persons” under the CFPA.* Section 5584(a) of the statute, which governs the CFPB’s enforcement authority, states that “[t]he CFPB may bring enforcement actions to ‘prevent a covered person or service provider from committing or engaging in an unfair, deceptive, or abusive act or practice.””°* Under the CFPA, a “covered person,” is “any person that engages in offering or providing a consumer financial product or service.”® Because “[t]he Trusts do not deny that their subservicers collected debt or serviced loans” the District Court noted that “this dispute boils down to the breadth of the word ‘engage.’”°® The central question in evaluating this inquiry was: “Does a person ‘engage’ in an activity if he contracts with a third party to do that activity on his behalf?”®’ The court’s answer was “Yes.”
Relying on multiple dictionaries, the District Court determined that “‘[e]ngage’ means to ‘to embark in any business’ or to ‘enter upon or employ oneself in an action.’”®
3 See id. at 509.
64 Td. (quoting 12 U.S.C. § 5531(a)).
6 12 U.S.C. § 5481(6)(A).
6° CFPB II, 575 F. Supp. 3d at 509.
67 Td. (emphasis added).
68 Td.
® Td. (citing Engage (def. 16), Oxford English Dictionary (2d ed. 2000)); see also Engage, Black’s Law Dictionary (11th ed. 2019) (“To employ or involve oneself; to take part in; to embark on.”’).
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This definition, it found, was “broad enough to encompass actions taken on a person’s behalf by another, at least where that action is central to his enterprise.”’° The court found that “Tt]he Trusts ‘embark[ed] in [the] business’ of collecting debt and servicing loans when they contracted with the servicers and subservicers to collect their debt and service their loans.””! The court continued, “[t]he Trusts cannot claim that they were not ‘engaged in’ a key part of their business just because they contracted it out.””
Shortly thereafter, the Trusts and intervenors timely filed a motion for interlocutory appeal. The District Court certified two questions for review: first, the statutory question whether the Trusts are “‘covered persons’ subject to the [CFPB’s] enforcement authority” under the CFPA;” second, the constitutional question, whether, after Collins, “the Bureau need[ed] to ratify this suit before the statute of limitations ran, having first filed it while the Bureau’s director was improperly insulated from presidential removal[.]””4
1 CFPB II, 575 F. Supp. at 509.
1 Td.
? Td. at 509-10 (citing Barbato v. Greystone All., LLC, 916 F.3d 260, 266—68 (3d Cir. 2019) (finding that a “passive debt owner” counted as a “debt collector” under the Fair Debt Collection Practices Act when it contracted with a third party to collect debt on its behalf)).
3 JA20.
4 JA20.
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I. JURISDICTION AND STANDARD OF REVIEW
The Trusts petitioned us for review pursuant to 28 U.S.C. § 1292(b).” We have jurisdiction under that same provision.’© We also have jurisdiction pursuant to 28 U.S.C. § 1331. We review questions certified for interlocutory review de novo.”
Il. DISCUSSION A. Statutory Question
The statutory dispute between the parties boils down to a central question: Are the Trusts “covered persons” under the CFPA because they engage in consumer financial products or services?’
In interpreting a statute, we begin our analysis with the plain language of the statute. Just as the District Court did, we “[s]tart with the text.””? That text begins with 12 U.S.C. § 5531(a), which dictates the CFPB’s enforcement authority. The statute states the following:
1° NCMSLT Br. at 4-5.
7° NCMSLT Br. at 4.
7 Barbato, 916 F.3d at 264.
78 See NCMSLT Br. at 24, 33; CFPB Br. at 12.
” CFPB II, 575 F. Supp. 3d at 509; see Republic of Sudan v. Harrison, 139 S. Ct. 1048, 1056 (2019) (“We begin ‘where all [statutory interpretation] inquiries must begin: with the language of the statute itself.’” (quoting Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S, 566 U.S. 399, 412 (2012) (cleaned
up))).
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The Bureau may take any action . . . to prevent a covered person or service provider from committing or engaging in an unfair, deceptive, or abusive act or practice under Federal law in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service.®°
A “covered person” is defined by § 5481(6)(A) as “any person that engages in offering or providing a consumer financial product or service.”*! To apply the statutory interpretive framework above, and thus determine whether the Trusts are “covered persons” subject to the CFPB’s enforcement
80 12 U.S.C. § 5531(a) (emphases added).
81 12 U.S.C. § 5481(6)(A). The omitted portion of this provision states the following: “and any affiliate of a person described in subparagraph (A) if such affiliate acts as a service provider to such person.” While we do agree that servicers were “central” to the Trusts’ “enterprise,” see JA14, neither party argues at this time that the Trusts should be liable for the acts of the servicers. Indeed, that would likely be an entirely different matter. See CFPB Br. at 31; Barbato, 916 F.3d at 269-70 (illustrating that whether one can be liable for the actions of another is a different question from the one presented on appeal). As such, we need not evaluate affiliate liability, especially if the Trusts can be said to “engage” on their own accord. Thus, the relevant inquiry is not whether the servicers are an affiliate of the Trusts, but whether the Trusts “engaged” others to proliferate their business.
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authority, we must look to “engage” in its statutory context.*?
To streamline this process, we will define this context first so that we can then apply “engage” against that background.
A “person,” under the CFPA, “means an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity.”°? “Trusts” are explicitly mentioned here. Additionally, the Trusts are statutory trusts formed under Section 3801 of Title 12 of the Delaware Code.™ Title 12 of the Delaware Code states that statutory trusts are defined as “unincorporated associations.”** Congress’s intent is clear: the Trusts were to be included as “persons” under the CFPA.*°
A similarly inevitable conclusion is reached when defining “consumer financial product[s and] service[s].”°’ In
82 Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997) (“The plainness or ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole.’’); see JA14.
83.12 U.S.C. § 5481(19).
84 CFPB I, 2021 WL 1169029, at *1.
85 12 Del. Code § 3801(i).
86 “If the language of the statute expresses [the legislature’s] intent with sufficient precision, the inquiry ends there and the statute is enforced according to its terms.” Gregg, 226 F.3d at 257 (“If the language of the statute expresses [the legislature’s] intent with sufficient precision, the inquiry ends there and the statute is enforced according to its terms.”’).
8712 U.S.C. § 5481(5).
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defining this phrase,** the statute directs us to the definition of “financial product or service.”®? Under § 5481(15), a financial product or service may include “extending credit and servicing loans.”’?° The Trusts themselves state in their opening brief that they “were formed to acquire a pool of private student loans, to issue securitized notes on those loans, and to provide for the servicing of the loans and the distribution to noteholders of the loan payments made by _borrowers.’”?! Thus, they unambiguously fall within the statute.”
We then turn to the primary statutory question: whether the Trusts “engage.” If they do “engage,” they are covered persons under the CFPA; if they do not, they do not fall within the purview of the CFPA. The District Court found “room for reasonable disagreement” in the definition of “engage.” For this reason, we will look to other interpretative measures to
88 See supra notes 80-81 and accompanying text.
8° 12 U.S.C. § 5481(5).
° Td. § 5481(15)(A)(i). Thus, the terms of § 5481(15) are included in § 5481(5).
°! NCMSLT Br. at 10 (emphasis added) (citing JA107, which is part of the trust agreement).
*»? This point does not seem to be disputed by the parties. See Amici Br. Securities Ind. & Fin. Mkts. Assoc. at 15 (stating that the Trusts “do not, and cannot, ‘engage in’ offering or providing consumer financial products or services such as the debt collection services at issue here” (emphasis added)); see also JA13-—14 (True, third parties, not the Trusts, collected the debt and serviced the loans. But the loan servicing and debt collection were crucial to the Trusts’ business and could not have happened without their say-so.”).
3 JAI4.
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define this term. To do so, we will review how this definition has been applied in earlier cases.”
In Southwest Airlines Co. v. Saxon, the Supreme Court had to determine whether a “class of workers engaged in foreign or interstate commerce.”” Southwest Airlines attempted to enforce an arbitration agreement against Saxon under the Federal Arbitration Act (FAA).’° In response,
4 Unfortunately, Dodd-Frank’s legislative history does not adequately define “engage.” Thus, we cannot glean much by examining CFPA’s history. Something we can glean, though, is that when Dodd-Frank was before Congress, its purpose was broad: “This is a time to bring certainty back into the market and reasonable regulation and reasonable enforcement back to the financial system.” 156 Cong. Rec. H5223-02, 156 Cong. Rec. H5223-02, H5231. But Congress addressed the concern that the Act was too broad: “One of the initial concerns we heard was that companies who do not engage in consumer financial business would be regulated by [Dodd-Frank]. We fixed that. Merchants, retailers, doctors, realtors, and others— some suggested the butcher, the baker, the candlestick maker—let’s be clear, they’re exempt from [Dodd-Frank] as was intended and as they should be.” 155 Cong. Rec. H14762- 01, 155 Cong. Rec. H14762-01, H14773. So when Congress walked back Dodd-Frank’s broad grant of enforcement authority, it retained the notion that Dodd-Frank applies to those taking part in the financial system and consumer financial business. As such, it is clear that Congress intended the Dodd-Frank to apply to the consumer financial industry.
°° Sw. Airlines Co. v. Saxon, 596 U.S. 450, 457 (2022) (emphasis added) (internal quotations omitted).
© See Id.
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“Saxon [argued] that the [FAA] did not apply because she was a member of a ‘class of workers engaged in foreign or interstate commerce,’ and therefore exempted by § 1 of the [FAA].”?” To determine whether this exemption applied, the Supreme Court had to define “engage.”’”®
The Court, “begin[ning] with the text,” stated that the word “‘engaged’ . . . mean[s] ‘occupied,’ ‘employed,’ or ‘involved’ in [something].””? In applying this definition, the Court held that Southwest Airlines interpreted the statute too narrowly, and that Saxon, as a ramp supervisor for the airline, was part of a “‘class of workers engaged in foreign or interstate commerce’ to which [the statutory] exemption applies.”!°
This interpretation is consistent with colloquial and legal dictionaries that define “engage.” Merriam-Webster s Dictionary contemporarily defines engage as “to begin and carry on an enterprise or activity” and “to do or take part in something.”!®! Blacks Law Dictionary defines engage as: “To employ or involve one’s self; to take part in; to embark on.”! This definition has remained remarkably consistent over time,
7 Saxon v. Sw. Airlines Co., 993 F.3d 492, 495 (7th Cir. 2022). °8 Saxon, 596 U.S. at 463.
°” Td. (citing Webster’s New International Dictionary 725 (1922) and Black’s Law Dictionary 661 (3d ed. 1933) (defining “engage”’)).
100 J
10! Engage, Merriam-Webster’s Dictionary.
102 Engage, Black’s Law Dictionary (11th ed. 2019). This definition is also consistent with the one used by the District Court. See CFPB IT, 575 F. Supp. 3d at 509.
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and is the same definition referred to by the Supreme Court in Saxon.
Using this definition, we can now determine whether the Trusts “engage” in consumer financial products or services. If the Trusts meet any of the aforementioned definitions, they can be said to “engage.” For example, if they “embark on” or “take part in” collecting debt or servicing loans, they can be said to engage in those consumer financial products or services.‘ And if they engage, they will come under the purview of the CFPA.
The Trust Agreement that each Trust entered into states the following:
The purpose of the Trust is to engage in the following activities and only these activities: (i) To acquire a pool of Student Loans, to execute the Indenture and to issue the Notes; (ii) To enter into the Trust Related Agreements and to provide to the administration of the Trusts and servicing of the Student Loans; (iii) To engage in those activities and to enter into such agreements that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith; and (iv) To engage in other such activities as may be
103 Compare Engage, Black’s Law Dictionary (3d ed. 1933) with Engage, Black’s Law Dictionary (11th ed. 2019).
104 The District Court found “debt collection and loan servicing [to be] core aspects of the Trusts’ business model.” CFPB II, 575 F. Supp. 3d at 509.
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required in connection with conservation of the Trust Property and Distributions to Owners. !”
Thus, the Agreement itself states that the Trusts “engage” in these activities, which include consumer financial products or services. Nonetheless, because the parties dispute the definition of engage, we will apply it to each purpose mentioned in the Trust Agreement.
First, in “acquir[ing] a pool of Student Loans,’’!°° the Trusts “beg[an] . . . an enterprise or activity,”!°’ with that enterprise!°* “involv[ing]”! financial products or services. As the Trusts themselves state in their brief, “the defendants are 15 statutory trusts formed to purchase, pool, and securitize student-loan debt.’””!!° Moreover, it seems unlikely that one can
acquire!!! something without “involv[ing] one’s self.””!!?
Second, the Trusts “carr[ied] on [their] enterprise” through Administration Agreements.'!? These Agreements “make clear the Administrator will ‘perform’ the ‘duties of the
105 JA107 (emphasis added).
106 Tq
107 See supra note 101.
108 See Enterprise, Black’s Law Dictionary (11th ed. 2019) (“An organization or venture, esp[ecially] for business purposes.’’).
10° Engage, Black’s Law Dictionary (11th ed. 2019).
110 NCMSLT Br. at 1.
Nl See Acquire, Black’s Law Dictionary (11th ed. 2019) (“To gain possession or control of; to get or obtain.”).
2 NCMSLT Br. at 1.
113 See supra note 101.
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[Trusts].’”'!4 More particularly, “[t]he Administrator shall prepare for execution . . . , or shall cause the preparation . . . of, all such documents, reports, filings, instruments, certificates and opinions . . . of the [Trusts] . . . pursuant to the Trust Related Agreements.”'!> In this vein, “the Administrator need not await instructions before pursuing ordinary course lawsuits initiated “by the [Trust] or its agents . . . for the collection of the Student Loans owned by the [Trust].’””''® Therefore, through the Administration Agreements, the Trusts “involv[ed]”!!’ themselves in consumer financial products or services.
Third, the Trusts “carr[ied] on [their] enterprise”!'® by further “involv[ing]”!!? themselves in agreements for the servicing of loans.!?° Another such set of agreements were Servicing Agreements, which were entered into by the
4 Tn re NCLST, 251 A.3d at 140 (alteration in original) (quoting JA150). While the Trusts purport that the Administrator is separate from the Trusts, see NCMSLT Br. at 11 (arguing that “the Administrator is ‘not . . . subject to the supervision of the [Trusts] or the Owner Trustee with respect to the manner in which it accomplishes the performance of its obligations’”’), we need not address this claim. It is a bridge too far. All we need to determine is whether the Trusts engaged in such agreements.
115 JA149.
16 Ty re NCLST, 251 A.3d at 140-41 (alteration in original) (quoting JA151).
7 Engage, Black’s Law Dictionary (11th ed. 2019).
118 See supra note 101.
9 Engage, Black’s Law Dictionary (11th ed. 2019).
120 See supra note 101.
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Administrator.'*! Servicing Agreements were a necessary part of their business.!?* Again, as the Trusts mention in their brief, “It]hey have no employees and no directors.”!”>_ So, in order to fulfill their obligation of “servicing . . . student loans”!** they had to enter into agreements with “third parties [to] collect[] the debt and service[] the loans,” which “could not have happened without [the Trusts’] say-so.”!?° Indeed, without these agreements, the Trusts could not have “embark[ed] on’”’”6 the servicing of student loans.
Finally, the Trust Agreement states that the Trusts are to “engage in other activities’ that may be “required in connection or conservation of Trust Property ....”!?’ Trust Property, according to the Trust Agreement, is defined as “all right, title and interest of the Trust or the Owner Trustee on behalf of the Trust in and to any property contributed to the Trust.”!*8 And “the Trusts retained legal title to the Collateral [i.e., the Student Loans] so that they could collect Student Loans for distribution ... .”!2? When suits are brought against borrowers for the Trusts to collect on student loans, third parties are acting for the benefit of the Trusts.!°° As such, the
'21 Ty re NCLST, 251 A.3d at 131.
122 JAI4.
23 NCMSLT Br. at 1.
124 See supra note 105.
125 JA13.
126 Engage, Black’s Law Dictionary (11th ed. 2019). 127 See supra note 105.
128 JA105.
!29 In Re NCSLT, 251 A.3d at 194.
130 See supra note 15 and accompanying text.
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Trusts cannot claim that they did not “take part in” collecting debts. !3!
The Trust Agreement’s purpose indicates that the Trusts engage in both student loan servicing and debt collection. As such, the Trusts fall within the purview of the CFPA because they “engage” in a known “consumer financial product or service” and are necessarily subject to the CFPB’s enforcement authority. !°
B. Constitutional Question
We now turn to the constitutional question that was certified: Ratification of agency action. The Trusts argue that the underlying suit needed to be ratified by the Director of the CFPB because it was initiated while the agency head was improperly insulated; and since that ratification came after the statute of limitations had run, the suit was untimely.!* Moreover, they claim that action undertaken while an agency head is impermissibly insulated creates a “here-and-now injury.”'*4 The CFPB responds by arguing that ratification was not necessary in the wake of Collins because the agency head was properly appointed and the statute did not cause harm to the Trusts. !°>
To properly evaluate these arguments, we must briefly revisit our discussion of Collins. As the District Court found,
131 See supra notes 15, 91, 104, and accompanying text. 132 19 U.S.C. § 5584(a).
33 NCMSLT Br. at 49-53.
34 NCMSLT Br. at 21.
135 CFPB Br. at 34-54.
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“Tt]he [Collins] Court explained that actions taken by an improperly insulated director are not ‘void’ and do not need to be ‘ratified’ unless a plaintiff can show that the removal provision harmed him.”!*° The parties do not dispute whether the CFPB Director was properly appointed.'*’ Thus, the heart of the issue is whether the insulation provision, 12 U.S.C. § 5491(c), caused harm.'*8 This is not an issue of first impression. We begin by evaluating the approaches our sister circuits have taken in interpreting Collins.
The Second Circuit Court of Appeals in CFPB v. Law Offices of Crystal Moroney, P.C.,'°° addressed whether a civil investigative demand (CID), often the first step in an enforcement suit by the CFPB “was void ab initio because, when the CID was issued, the CFPB Director was shielded by an unconstitutional removal provision.” !4° The court held that “[t]his argument is foreclosed by the Supreme Court’s decision in Collins.”'*' It interpreted the Court in Collins as “h[olding] that the relevant inquiry for determining whether an officer ‘lacked constitutional authority and that [her] actions were
136 JA16 (citing Collins, 141 S. Ct. at 1787-88).
'37 JA15. However, the Trusts do argue that the harm from impermissible insulation is “indistinguishable” from harm of improper appointment.
138 Cf Kaufmann v. Kijakazi, 32 F.4th 843, 849-50 (9th Cir. 2022) (holding that, when an agency head is impermissibly insulated, the matter is to be decided based on whether the statute itself caused harm).
139 63 F.4th 174 (2d Cir. 2023). A Petition for Writ of Certiorari has been docketed.
140 Td. at 179.
141 Tq.
Page 113
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therefore void ab initio’ is whether the officer in question [was] properly appointed,’ not whether she was _ properly removable.”'* Like our interpretation of Collins today, the circuit court also noted that a party could, nevertheless, “be entitled to relief if it could show that ‘an unconstitutional provision . . . inflictied] compensable harm’ on_ the petitioner.” In determining the nature of that harm, the circuit court relied on Justice Kagan’s concurrence to determine that “[rJequiring but-for causation in these cases properly matches the constitutional injury to the requested remedy.”'** The circuit court found this interpretation to be consistent with its own and with Supreme Court precedents. !4°
The Ninth Circuit Court of Appeals in Kaufmann vy. Kijakazi,'*© further defined the requisite harm. There, the circuit court was faced with deciding whether an impermissibly insulated agency head violated the separation of powers, and if so, whether the agency action was necessarily void.'4’ At the outset, the court noted that, “[flor the purpose of the constitutional analysis, the Commissioner of Social Security is indistinguishable from the Director of the FHFA discussed in Collins and the Director of the CFPB discussed in
'42 Td. (alterations in original) (quoting Collins, 141 S. Ct. at 1787). Again, we agree that the CFPB’s Director was properly appointed. See JA15 (stating that “the Bureau’s director was properly appointed”’).
'43 Td. (quoting Collins, 141 S. Ct. at 1789).
'44 Td. at 180.
145 Tq
46 32 F.4th 843 (9th Cir. 2022).
‘47 Kaufmann, 32 F Ath at 846.
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Seila Law.”'*8 Much like Seila Law, the circuit court also
found “the removal provision . . . severable from the remainder of the statute,” and that the remainder of the statute was capable of functioning independently of the impermissible provision.'*’ Still, the circuit court also noted that “[a] party challenging an agency’s past actions must . . . show how the unconstitutional removal provision actually harmed the party.” °° “[U]nless a claimant demonstrates actual harm, the unconstitutional provision has no effect on the claimant’s case. Because Claimant has not shown actual harm, we uphold the Commissioner's decision.”’!>!
Here, as discussed above, the Trusts claim that an unconstitutional provision violating the separation of powers caused them harm.? But a mere allegation that the unconstitutional provision inherently caused them harm is insufficient. There must be something more.!* For example, if the CFPA suggested “any link whatsoever between the removal provision and [c]laimant’s case,” then the Trusts may be entitled to some type of relief. !*4
'48 Td. at 849.
149 Td. (“[O]ne provision of a [statute] may be invalid by reason of its not conforming to the Constitution, while all the other provisions may be subject to no constitutional infirmity.”) (quoting Seila Law, 140 S. Ct. at 2208)) (alteration in original). 150 Tq.
‘ST Tq. at 850 (emphasis added).
'S2 That harm is the purported “here-and-now” injury. See supra note 134 and accompanying text; infra note 159 and accompanying text.
'S3 Td. at 849-50.
'54 Td. at 850.
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We cannot find such a link. The statute, in relevant part, states: “The Director shall serve for a term of 5 years”; “An individual may serve as Director after the expiration of the term for which appointed, until a successor has been appointed and qualified”; and “The President may remove the Director for inefficiency, neglect of duty, or malfeasance in office.”!*> There is no notion in this statute that the CFPB would have taken this action but for the President’s inability to remove the Director.'°® On the contrary, as the District Court noted, there “is strong evidence that this suit would have been brought regardless” of a president’s authority to remove because the CFPB’s litigation strategy has been consistent across five directors, four of whom were removable at will.!°’
While the Trusts argue that the unconstitutional provision, in and of itself, created a here-and-now injury,'°* their analysis of the injury does not go far enough. They argue that harm from an unconstitutional statutory restriction on removal authority is “indistinguishable” from the “harm suffered under the authority of executive officers who were not properly appointed in the first instance.”!? This presupposition of harm, as discussed above, is foreclosed by
'S5 12 U.S.C. § 5491.
156 See Kaufmann, 32 F Ath at 850.
'S7 See CFPB II, 575 F. Supp. 3d at 508; supra notes 61-62 and accompanying text.
‘58 NCMSLT Br. at 21 (“An enforcement action initiated by an unconstitutionally structured agency inflicts a ‘here-and-now’ injury, that demands a remedy tailored ‘to the injury suffered.’” (quoting United States v. Morrison, 449 U.S. 361, 364 (1981))) (cleaned up).
'59 NCMSLT Br. at 62.
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Collins and its progeny because there must be an actual, compensable harm in order for there to be an injury from an impermissible insulation provision.!© Again, the circuit court in Kaufmann held that an impermissible insulation provision does not, on its own, cause harm, and “unless a claimant demonstrates actual harm, the unconstitutional provision has no effect on the claimant’s case.” !°!
Additionally, the Trusts’ interpretation of their purported injury seems to be in discord with other precedential examples of “here-and-now” injuries. For example, the Supreme Court has noted that “subjection to an illegitimate proceeding, led by an illegitimate decisionmaker” is a manifestation of a “here-and-now” injury.' There is no support in the record for the notion that instant proceeding was similarly illegitimate because, like Kaufmann, there is no indication that this suit would have been undertaken but-for a president’s authority to remove the CFPB’s Director, or that the CFPB was able to target the Trusts via the unconstitutional provision.'® In another example, in Sherley v. Sebelius, the D.C. Circuit Court of Appeals found there to be a “here-andnow injury” when doctors would have to invest additional time and resources because of a loss, or different allocation, of funding.’ In both of these examples, there was a compensable and identifiable harm. Here, there is no such thing.
160 Kaufmann, 32 F Ath at 850.
16! See id. (emphasis added).
162 Axon Enter., Inc. v. Fed. Trade Comm’n, 143 S. Ct. 890, 903 (2023).
163 See CFPB II, 575 F. Supp. 3d at 508.
164 610 F.3d 69, 74 (D.C. Cir. 2010).
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The Trusts argue, contrary to these precedents, that Collins did not actually change the legal landscape, and that the matter before us still needed to be ratified by a properly appointed director after the constitutional defect was cured via severing pursuant to 12 U.S.C. § 5491(c).!©° This notion is directly counter to the Supreme Court’s holding in Collins. It is also counter to guidance provided by our sister courts. For example, the Tenth Circuit Court of Appeals in Integrity Advance, LLC v. CFPB held that “Collins put to rest” the argument that ratification was necessary for actions taken while the agency was unconstitutionally structured.'® And the Ninth Circuit Court of Appeals had nearly the same interpretation of a post-Collins world: “We find it unnecessary to consider ratification because [Collins] has made clear that despite the unconstitutional limitation on the President’s authority to remove the Bureau’s Director, the Director’s actions were valid when they were taken.”!®’
We see no need to remand the ratification issue. As our sister courts have noted, “[w]hile Collins remanded for further factual development on the issue of harm, we need not do so here, as the record is clear.” !®* The record is also clear here: There is no indication that the unconstitutional limitation on the President’s authority harmed the Trusts.
‘65 NCMSLT Br. at 53-67.
166 48 F.4th 1161, 1170 (10th Cir. 2022), cert. denied, No. 22- 838, 2023 WL 3937614 (June 12, 2023).
'67 CFPB vy. CashCall, Inc., 35 F.4th 734, 742 (9th Cir. 2022). 168 Decker Coal Co. v. Pehringer, 8 F.4th 1123, 1137 (9th Cir. 2021) (citation omitted).
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CONCLUSION
For the above reasons, we will respond to the District Court’s queries by holding that (1) the Trusts are covered persons subject to the CFPA’s enforcement authority because they “engage” in the requisite activities and (2) the CFPB did not need to ratify this action before the statute of limitations had run.
Stipulation ()
PDF of this document (16 pages)
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IN THE UNITED STATES COURT FOR THE DISTRICT OF DELAWARE
CONSUMER FINANCIAL
) PROTECTION BUREAU,
)
)
Plaintiff,
)
)
v.
) Case No. 17-cv-01323-SB
)
NATIONAL COLLEGIATE MASTER
) STUDENT LOAN TRUST, et al.,
)
)
Defendants.
)
)
STIPULATED FINAL JUDGMENT AND ORDER
This Stipulated Final Judgment and Order (“Order”) is entered between Plaintiff, Consumer Financial Protection Bureau (“Bureau”), and Defendants, The National Collegiate Master Student Loan Trust I, National Collegiate Student Loan Trust 2003-1, National Collegiate Student Loan Trust 2004-1, National Collegiate Student Loan Trust 2004-2, National Collegiate Student Loan Trust 2005-1, National Collegiate Student Loan Trust 2005-2, National Collegiate Student Loan Trust 2005-3, National Collegiate Student Loan Trust 2006-1, National Collegiate Student Loan Trust 2006-2, National Collegiate Student Loan Trust 2006-3, National Collegiate Student Loan Trust 2006-4, National Collegiate Student Loan Trust 2007-1, National Collegiate Student Loan Trust 2007-2, National Collegiate Student Loan Trust 2007-3, National Collegiate Student Loan Trust 2007-4 (collectively “NCSLTs,” “the Trusts,” or the “Defendants”). The Bureau and the NCSLTs agree to entry of this Order, without further adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the Amended Complaint.
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RECITALS 1.
On September 18, 2017, the Bureau commenced this civil action against Defendants to obtain injunctive and monetary relief and civil penalties. On April 30, 2021, the Bureau filed the Amended Complaint alleging violations of sections 1031(a) and 1036(a) of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5531(a), 5536(a)(1)(B), in connection with the servicing of student loans held by the Trusts. On January 26, 2022, Defendants filed an answer, in which they denied certain allegations. Defendants otherwise neither admit nor deny the allegations in the Amended Complaint, except that Defendants admit the facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action.
2.
This Court has jurisdiction over the parties and the subject matter of this action. 3.
The Trusts waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order and any claims they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each Party agrees to bear its own costs and expenses, including, without limitation, attorneys’ fees.
4.
Entry of this Order is in the public interest.
DEFINITIONS 5.
The following definitions apply to this Order:
a. “Affected Consumers” means Consumers identified on the Master List from whom funds were collected pursuant to a Collections Lawsuit filed between November 1, 2012, and September 18, 2017, by Law Firms retained by one of Defendants’ Special Sub-Servicers on behalf of the Trusts to collect a Debt where: (a) the chain-of- Case 1:17-cv-01323-SB Document 458-1 Filed 01/16/25 Page 2 of 16 PageID #: 11083
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assignment documentation necessary to prove Trust ownership of the Debt was not located; or (b) the lawsuit was time-barred.
b. “Affiant” means any signatory to an Affidavit, other than one signing solely as a notary or witness to the act of signing, signing in that person’s capacity on behalf of one or more of the Defendants.
c. “Affidavit” means any sworn statement filed with a court in connection with litigation to collect a Debt.
d. “Collections Lawsuits” means lawsuits filed in the United States of America on behalf of and in the name of one or more of the NCSLTs to establish a Consumer’s liability for a Debt and collect on that Debt through judicial processes. e. “Consumer” means any natural person obligated or allegedly obligated to pay any Debt.
f. “Debt” means any obligation or alleged obligation of a Consumer to pay money arising out of a student loan held by one or more NCSLTs, whether or not such obligation has been reduced to judgment.
g. “Effective Date” means the date on which the Judgment and Order is entered on the docket by the Court.
h. “Enforcement Director” means the Enforcement Director of the Division of Enforcement for the Consumer Financial Protection Bureau, or their delegate. i. “Law Firm” means a law firm engaged on behalf of one or more Defendants in connection with a Collections Lawsuit.
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j. “Master List” means the list, agreed upon by the Bureau and Defendants prior to entry of this Order, of Collections Lawsuits and/or Debt involving Affected Consumers.
k. “Monthly Pay Trusts” means NCSLTs other than the Quarterly Pay Trusts. The Monthly Pay NCSLTs are monthly-pay trusts that make Distribution Date payments each month on the 25th calendar day or if such day is not a business day, the next business day thereafter.
l. “NCSLT-related Entity” means any of the following entities in relation to any of the Defendants: the Indenture Trustee; the Owner Trustee; and the Administrator, not in their individual capacities, but solely in each such entity’s capacity as such under the NCSLT Trust Related Agreements.
m. “Quarterly Pay Trusts” means The National Collegiate Student Loan Trust 2003-1 and The National Collegiate Student Loan Trust 2004-1, which are quarterly pay trusts that make Distribution Date payments each quarter. The National Collegiate Student Loan Trust 2003-1 makes Distribution Date payments on the 25th calendar day or if such day is not a business day, the next business day thereafter in the months of February, May, August, and November. The National Collegiate Student Loan Trust 2004-1 makes Distribution Date payments on the 25th calendar day or if such day is not a business day, the next business day thereafter in the months of March, June, September, and December.
n. “Special Sub-Servicer” means the entity that services or serviced past due or defaulted student loans owned by Defendants, including by retaining Law Firms to handle Collections Lawsuits.
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o. “Trust Related Agreements” means all agreements in force as of the date of this Order to which the Trusts are a party and that relate to the securitization or servicing of the Loans owned by the Trusts.
CONDUCT PROVISIONS I.
Prohibited Conduct IT IS ORDERED that, under §§ 1053 and 1055 of the CFPA: 6.
Defendants may not take any action to cause any service provider to violate sections 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531, 5536, with respect to lawsuits filed to collect on defaulted private student loans that lack documentation necessary to prove Trust ownership of the loans or involving debt that is time-barred. 7.
With regard to Debt associated with Collections Lawsuits identified in the Master List, Defendants are permanently restrained and prohibited from taking any action to cause any service provider to collect or to seek to collect the Debt; furnish information to consumer reporting agencies on the Debt; or resell the Debt. II.
Affirmative Requirements IT IS ORDERED that, under §§ 1053 and 1055 of the CFPA: 8.
Within 30 days of the Effective Date, Defendants shall ensure, to the fullest extent of Defendants’ rights under the Trust Related Agreements, that the relevant sub-servicing entity is directed to:
a. withdraw, dismiss, or terminate all pending Collections Lawsuits on the Master List; Case 1:17-cv-01323-SB Document 458-1 Filed 01/16/25 Page 5 of 16 PageID #: 11086
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b. cease post-judgment enforcement activities on Collections Lawsuits on the Master List;
c. seek to remove, withdraw, or terminate any active wage garnishment, bank levies, and similar means of enforcing judgments or settlements relating to Collections Lawsuits on the Master List; and d. cease accepting settlement payments related to Collections Lawsuits on the Master List.
9.
In the event that an entity other than the current Special Sub-Servicer is retained to service past due and defaulted NCSLT loans, including selecting and overseeing Law Firms (“Alternative Special Sub-Servicer”), the Trusts shall not enter into a contract with the Alternative Special Sub-Servicer, nor shall cause any service provider to do so on the Trusts’ behalf, unless the contract includes:
a. provisions requiring the Alternative Special Sub-Servicer to maintain a compliance program with provisions addressing the following: i. comprehensive, written policies and procedures designed to prevent violations of Federal consumer financial laws and associated risks of harm to Consumers with respect to Collections Lawsuits;
ii. an effective employee training program required for all employees with any involvement in Collections Lawsuits, including but not limited to Affiants, whose duties include reviewing, executing, preparing, processing, verifying, or notarizing of Affidavits that includes regular, specific, comprehensive training in Federal consumer financial laws commensurate with individual job functions and duties;
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iii. implementation of reasonable and appropriate written policies and procedures to ensure the proper notarization processes for Affidavits, including that notaries place the Affiants under oath and witness their signatures; iv. implementation of reasonable and appropriate written policies and procedures to ensure that Affiants verify the accuracy of each statement made in an Affidavit before executing the Affidavit; and v. comprehensive written policies and procedures designed to ensure that any Law Firms engaged by the Alternative Special Sub-Servicer to collect Debt do not violate any Federal consumer financial laws, which must include at a minimum:
1. the Law Firm’s duty to maintain adequate internal controls to ensure compliance with Federal consumer financial laws; 2. the Law Firm’s duty to provide adequate training on compliance with all applicable Federal consumer financial laws and the Alternative Special Sub-Servicer’s policies and procedures related to Collections Lawsuits;
3. the Alternative Special Sub-Servicer’s authority to conduct periodic onsite reviews of the Law Firm’s controls, performance, and information systems related to Collections Lawsuits; and 4. periodic review by the Alternative Special Sub-Servicer of the Law Firm’s controls, performance, and information systems related to Collections Lawsuits; and Case 1:17-cv-01323-SB Document 458-1 Filed 01/16/25 Page 7 of 16 PageID #: 11088
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b. unless the Alternative Special Sub-Servicer is already subject to the CFPB’s supervisory authority, a provision requiring the Alternative Special Sub-Servicer to consent to any request by the CFPB to examine the Alternative Special Sub- Servicer’s adherence to the compliance program referenced above with respect to Collections Lawsuits.
10.
The Trusts shall notify the CFPB in writing at least 30 days before execution of a contract with an Alternative Special Sub-Servicer to oversee Collections Lawsuits of an intention to enter into such a contract, including a copy of a proposed contract. The Notice shall include an assessment of the Alternative Special Sub-Servicer’s readiness to maintain the compliance program referenced in Paragraph 9(a), and, to the extent that the assessment indicates incomplete readiness, a detailed plan for the prospective Alternative Special Sub-Servicer to adhere to the requirements of the contractual provisions referenced in Paragraph 9(a) within a reasonable time after contract execution. MONETARY PROVISIONS III.
Order to Pay Redress IT IS FURTHER ORDERED that:
11.
A judgment for monetary relief, redress, and damages is entered in favor of the Bureau and against Defendants in the amount of $2,250,000.
12.
Within 60 days of the Effective Date, the Monthly Pay Trusts must pay at least one sixth of their respective proportions of the redress amount by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions. To the extent not already paid in full, each ensuing month thereafter, on the monthly distribution date, the Case 1:17-cv-01323-SB Document 458-1 Filed 01/16/25 Page 8 of 16 PageID #: 11089
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Monthly Pay Trusts must pay another one sixth of their respective proportions of the redress amount by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions, until the Monthly Pay Trusts have fully paid their respective proportions of the total redress amount.
13.
Within 120 days of the Effective Date, the Quarterly Pay Trusts must pay their respective proportions of half of the redress amount by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions. Within 180 days of the Effective Date, the Quarterly Pay Trusts must pay their respective proportions of the remaining one half of the redress amount by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions. 14.
Any funds received by the Bureau in satisfaction of this judgment will be deposited into a fund or funds administered by the Bureau or the Bureau’s agent according to applicable statutes and regulations to be used for redress to Affected Consumers as identified by the Bureau, including but not limited to refund of moneys, restitution, damages, or other monetary relief, and for any attendant expenses for the administration of any such redress.
15.
The Bureau may use any remaining funds to pay additional redress to Affected Consumers. If the Bureau determines, in its sole discretion, that additional redress to Affected Consumers is wholly or partially impracticable or otherwise inappropriate, or if funds remain after the additional redress is completed, the Bureau will deposit any remaining funds in the U.S. Treasury. Defendants will have no right to challenge any actions that the Bureau or its representatives may take under this Section. Case 1:17-cv-01323-SB Document 458-1 Filed 01/16/25 Page 9 of 16 PageID #: 11090
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16.
Payment of redress to any Affected Consumer under this Order may not be conditioned on that consumer waiving any right.
IV.
Additional Monetary Provisions IT IS FURTHER ORDERED that:
17.
In the event of any default on Defendants’ obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the Effective Date to the date of payment, and will immediately become due and payable.
18.
Defendants must relinquish all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendants, except that if an appeal is brought by a party other than Defendants and there is a final determination on appeal that this Order is erroneous and is reversed or vacated, then the parties shall file a joint motion in either the appellate court or this Court for an order requiring the Bureau to return the funds within 60 days. If the appellate court or this Court thereby issues an order making clear that the Bureau must return the funds, the Bureau will comply with the terms of such an order and return the funds to Defendants. 19.
Defendants acknowledge that their Taxpayer Identification Numbers (Social Security Number or Employer Identification Number), which Defendants previously submitted to the Bureau, may be used for collecting and reporting on any delinquent amount arising out of this Order, in accordance with 31 U.S.C. § 7701. Case 1:17-cv-01323-SB Document 458-1 Filed 01/16/25 Page 10 of 16 PageID #: 11091
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COMPLIANCE PROVISIONS V.
Reporting Requirements IT IS FURTHER ORDERED that:
20.
For 5 years after the Effective Date, Defendants must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to, a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the filing of any bankruptcy or insolvency proceeding by or against Defendants; or a change in Defendants’ names or addresses. A Defendant must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, but in any case, no longer than 14 days after the development. 21.
Within 7 days of the Effective Date, Defendants must designate at least one telephone number and email, physical, and postal addresses as points of contact that the Bureau may use to communicate with each Defendant.
22.
Defendants must report any change in the information required to be submitted under Paragraph 20 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner.
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VI.
Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:
23.
Within 7 days of the Effective Date, Defendants must submit to the Enforcement Director an acknowledgment of receipt of this Order, sworn under penalty of perjury. 24.
Within 30 days of the Effective Date, Defendants must deliver a copy of this Order to each NCSLT-related Entity and the Special Sub-Servicer, and ensure, to the fullest extent of Defendants’ rights under the Trust Related Agreements, the relevant sub-servicing entity is directed to deliver a copy of this Order to any Law Firms who may have responsibilities related to the subject matter of this Order. 25.
For 5 years from the Effective Date, Defendants must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section V, and will ensure, to the fullest extent of Defendants’ rights under the Trust Related Agreements, the relevant sub-servicing entity is directed to deliver a copy of this Order to any Law Firms who will have responsibilities related to the subject matter of this Order before they assume their responsibilities.
26.
Defendants must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of the E- Sign Act, 15 U.S.C. § 7001 et seq., within 30 days of delivery, from each NCSLT-related Entity and the Special Sub-Servicer. Defendants must also ensure, to the fullest extent of Defendants’ rights under the Trust Related Agreements, that the relevant sub-servicing entity is directed to secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of the Case 1:17-cv-01323-SB Document 458-1 Filed 01/16/25 Page 12 of 16 PageID #: 11093
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E-Sign Act, 15 U.S.C. § 7001 et seq., within 30 days of delivery, from the Law Firms referenced in Paragraph 25.
27.
Ninety days from the Effective Date, Defendants must submit to the Enforcement Director a list of all persons and their titles to whom Defendants have delivered this Order under this Section and a copy of all signed and dated statements acknowledging receipt of this Order that Defendants have secured under Paragraph 26. VII.
Recordkeeping IT IS FURTHER ORDERED that:
28.
For a period of 5 years following the Effective Date, Defendants shall ensure, to the fullest extent of Defendants’ rights under the Trust Related Agreements, that the relevant NCSLT-related Entity or sub-servicing entity is directed to create and retain documents and records necessary to demonstrate full compliance with the Affirmative Requirements (Section II) and each provision of this Order, including all submissions to the Bureau. 29.
All documents and records must be maintained in their original electronic format. Data should be centralized and maintained in such a way that access, retrieval, auditing, and production are not hindered.
30.
Defendants must make the documents identified in Paragraph 28 available to the Bureau upon the Bureau’s request, or ensure, to the fullest extent of Defendants’ rights under the Trust Related Agreements, that the relevant NCSLT-related Entity or sub-servicing entity is directed to make such records available to the Bureau.
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VIII.
Notices IT IS FURTHER ORDERED that:
31.
Unless otherwise directed in writing by the Bureau, Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “In re CFPB v. The National Collegiate Master Student Loan Trust, et al., Case No. 17-1323-SB,” and send them by email to [email protected]:
ATTN: Enforcement Director Consumer Financial Protection Bureau Division of Enforcement IX.
Compliance Monitoring IT IS FURTHER ORDERED that:
32.
Within 14 days of receipt of a written request from the Bureau relevant to Defendants’ compliance with their obligations under this Order, Defendants must submit requested information, which must be sworn under penalty of perjury; provide sworn testimony; or produce documents responsive to the Bureau’s request. 33.
For purposes of this Section, the Bureau may communicate directly with Defendants or their designee, unless Defendants retain counsel related to these communications. 34.
Defendants must consent to Bureau representatives interviewing any person affiliated with Defendants, any NCSLT-related Entity, any of Defendants’ service providers, or the Special Sub-Servicer who has agreed to such an interview regarding: (a) this matter, (b) Case 1:17-cv-01323-SB Document 458-1 Filed 01/16/25 Page 14 of 16 PageID #: 11095
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anything related to or associated with the conduct described in the Amended Complaint, or (c) compliance with this Order. The person interviewed may have counsel present. 35.
Nothing in this Order will limit the Bureau’s lawful use of compulsory process under 12 C.F.R. § 1080.6.
X.
Transfer of Assignment of Operations IT IS FURTHER ORDERED that:
36.
Within 5 years of the Effective Date, should Defendants seek to transfer or assign all or part of their operations that are subject to this Order, including the transfer of student loan special sub-servicing rights, Defendants must, as a condition of sale or transfer, obtain the written agreement of the transferee or assignee to comply with all applicable provisions of this Order.
XI.
Administrative Provisions IT IS FURTHER ORDERED that:
37.
The Bureau releases and discharges Defendants from all potential liability for law violations that the Bureau has or might have asserted based on the practices alleged in the Amended Complaint, to the extent such violations occurred before the Effective Date and the Bureau knows about such practices as of the Effective Date. The Bureau may use the practices described in the Amended Complaint in future enforcement actions against Defendants and their affiliates, including, without limitation, to establish a pattern or practice of violations or the continuation of a pattern or practice of violations or to calculate the amount of any penalty. This release does not preclude or affect any right of Case 1:17-cv-01323-SB Document 458-1 Filed 01/16/25 Page 15 of 16 PageID #: 11096
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the Bureau to determine and ensure compliance with the Order or to seek penalties for any violations of the Order.
XII.
Retention of Jurisdiction IT IS FURTHER ORDERED that:
38.
The Court will retain jurisdiction of this matter for the purpose of enforcing this Order. IT IS SO ORDERED.
DATED this ___ day of ____________, 20__.
__________________________________________ United States Circuit Judge
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Stipulation ()
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UNITED STATES DISTRICT COURT DISTRICT OF DELAWARE
JOINT STIPULATION OF VOLUNTARY DISMISSAL WITH PREJUDICE
Pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii), Plaintiff Consumer Financial Protection Bureau and Defendants National Collegiate Master Student Loan Trust, National Collegiate Student Loan Trust 2003-1, National Collegiate Student Loan Trust 2004-1, National Collegiate Student Loan Trust 2004-2, National Collegiate Student Loan Trust 2005-1, National Collegiate Student Loan Trust 2005-2, National Collegiate Student Loan Trust 2005-3, National Collegiate Student Loan Trust 2006-1, National Collegiate Student Loan Trust 2006-2, National Collegiate Student Loan Trust 2006-3, National Collegiate Student Loan Trust 2006-4, National Collegiate Student Loan Trust 2007-1, National Collegiate Student Loan Trust 2007-2, National Collegiate Student Loan Trust 2007-3, National Collegiate Student Loan Trust 2007-4 (collectively, “Defendants”) stipulate that the above-captioned action is voluntarily dismissed in its entirety against all Defendants, with prejudice, with each party bearing its own costs, expenses and attorneys’ fees.
CONSUMER FINANCIAL PROTECTION BUREAU,
Plaintiff,
v.
NATIONAL COLLEGIATE MASTER STUDENT LOAN TRUST, et al.,
Defendants.
Case No. 17-1323-SB
Case 1:17-cv-01323-SB Document 474 Filed 04/25/25 Page 1 of 2 PageID #: 11393
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Dated: April 25, 2025 Respectfully submitted,
Mark Paoletta Chief Legal Officer Victoria Dorfman Senior Legal Advisor Cara Petersen Acting Enforcement Director Deborah Morris Deputy Enforcement Director
/s/ Stephen Jacques Stephen Jacques [email protected] 202-435-7368
CONSUMER FINANCIAL PROTECTION BUREAU 1700 G Street NW Washington, DC 20552 Facsimile: 202-435-7722
Attorneys for Plaintiff Consumer Financial Protection Bureau /s/ Michael A. Weidinger
Michael A. Weidinger (No. 3330) Megan Ix Brison PINCKNEY, WEIDINGER, URBAN & JOYCE, LLC 2 Mill Road, Suite 204 Wilmington, DE 19806 T: (302) 504-1528 F: (302) 442-7046 [email protected] [email protected]
OF COUNSEL:
Joshua Kipnees Peter W. Tomlinson Jonah Wacholder PATTERSON BELKNAP WEBB & TYLER 1133 Avenue of the Americas New York, NY 10036
Attorneys for Defendants
Case 1:17-cv-01323-SB Document 474 Filed 04/25/25 Page 2 of 2 PageID #: 11394