Pennsylvania Higher Education Assistance Agency, and National Collegiate Student Loan Trusts
Documents in this case
- Complaint · · 40 p.
- Stipulation · · 60 p.
- Stipulation · · 64 p.
- Stipulation · · 12 p.
- Stipulation · · 3 p.
- Dismissal · · 1 p.
Case summary
On May 6, 2024, the Bureau filed a complaint and two proposed stipulated final judgments to resolve the Bureau’s claims against the National Collegiate Student Loan Trusts (the Trusts) and the Pennsylvania Higher Education Assistance Agency d/b/a American Education Services (PHEAA), respectively. PHEAA is a student loan servicer and has been the primary servicer for loans held by the Trusts since at least 2006. The Bureau alleged that the Trusts and PHEAA violated the Consumer Financial Protection Act of 2010’s prohibition on unfair and deceptive acts and practices in connection with their failures to properly process and respond to student loan servicing requests from student borrowers, including requests for relief as a result of the COVID-19 pandemic.
The court entered the stipulated final judgments on October 1, 2024, overruling an objection by a third party, Pacific Investment Management Company, LLC (PIMCO), to entry of the settlement as to the Trusts. PIMCO appealed that order. PHEAA and the Trusts paid civil money penalties in compliance with the judgments, and on January 2, 2025, the district court granted PHEAA’s motion to stay the redress provisions of the Trusts’ judgment, pending the duration of PIMCO’s appeal.
On August 12, 2025, the Bureau, PHEAA, the Trusts, and PIMCO jointly moved the Third Circuit for a partial remand of the case to permit the parties to jointly move the district court to partially vacate or modify the stipulated judgments. On December 8, 2025, the district court entered a modified stipulated final judgment and order, which narrowed the prospective and injunctive provisions of the stipulated judgments, retaining only the civil money penalties and certain redress obligations related to borrower requests for Servicemembers Civil Relief Act protections. On January 6, 2026, the parties filed a joint stipulation of dismissal in the Third Circuit, and the court dismissed the appeal the next day.
Complaint ()
PDF of this document (40 pages)
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UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
CONSUMER FINANCIAL PROTECTION BUREAU,
Plaintiff,
v.
PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY, THE NATIONAL COLLEGIATE MASTER STUDENT LOAN TRUST I, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2003-1, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2004-1, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2004-2, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-1, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-2, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-3, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006- 1, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-2, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006- 3, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-4, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007- 1, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-2, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007- 3, and THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-4,
Defendants.
Case No.
COMPLAINT FOR PERMANENT INJUNCTION AND OTHER RELIEF
JURY DEMAND Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 1 of 40
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The Consumer Financial Protection Bureau (Bureau) brings this action against Pennsylvania Higher Education Assistance Agency (PHEAA) and fifteen (15) National Collegiate Student Loan Trusts (NCSLTs or the Trusts) (collectively Defendants), and alleges the following: INTRODUCTION 1.
Individuals and families facing financial difficulties have to make tough choices about how to prioritize and organize their spending. In these circumstances, timely and accurate information is essential. This was especially true during the unprecedented circumstances millions of American student loan borrowers faced in the early months of the COVID- 19 pandemic. But thousands of borrowers whose loans were owned by the NCSLTs and serviced by PHEAA were denied the critical information they needed in just such circumstances. Indeed, many of these borrowers were denied even the most basic information when they sought help from PHEAA and the Trusts: a simple yes or no response to requests for relief. For years, the Trusts failed to respond to borrowers’ requests for payment relief, and PHEAA failed to give accurate and useable information to borrowers seeking help. Instead, at times, PHEAA told borrowers that they needed to go to the Trusts for assistance, despite knowing that the Trusts were non-responsive and this would be a futile waste of time for borrowers. Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 2 of 40
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These failures caused significant consumer harm. 2.
The Trusts are business entities that acquire and hold pools of private student loans, collect on and provide for the servicing of those loans, and issue interest-bearing securities to investors backed by proceeds from student loan payments. The Trusts use an array of trustees and servicers, whose roles are defined by numerous interlocking agreements, to help carry out these functions.
3.
PHEAA is a student loan servicer and has been the primary servicer for performing loans held by the Trusts since at least 2006. In its capacity as servicer for the Trusts, PHEAA interacts with borrowers on the Trusts’ behalf. This includes accepting loan payments and accepting and responding to borrower requests, such as requests for reduced payment amounts, forbearance, or deferment.
4.
In servicing loans for the Trusts, PHEAA acted as the Trusts’ agent. It agreed to communicate with borrowers, manage their loan accounts, and collect payments from them on the Trusts’ behalf and for the Trusts’ benefit. PHEAA accepted and followed directions from the Trusts on how to conduct these activities.
5.
The Servicing Guidelines that govern how PHEAA services loans on the Trusts’ behalf do not provide it with the authority to decide Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 3 of 40
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certain borrower requests, such as requests to release co-signers from loans, extend forbearances, or compromise or settle outstanding loan balances.
6.
Prior to 2015, PHEAA forwarded such requests to certain other NCSLT-related entities for decision as Exception Requests. 7.
In or about 2015, disputes arose between various stakeholders in the Trusts. These disputes led to a general breakdown in the Trusts’ management and governance and rendered the process for deciding Exception Requests non-functional. From 2015 to 2021, thousands of borrower Exception Requests for various forms of payment relief went unanswered.
8.
During this time, PHEAA gave borrowers the misleading impression that their Exception Requests would receive a substantive response from the NCSLTs, despite knowing they would not. 9.
Beginning in March 2020, thousands of borrowers contacted PHEAA seeking temporary payment forbearance because of the COVID-19 pandemic. PHEAA had authority to grant these borrowers temporary forbearances for a natural disaster but mishandled some of them, improperly denying some requests that should have been granted and Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 4 of 40
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putting others on hold.
10.
PHEAA also mishandled borrower requests seeking forbearance extensions due to ongoing impacts from the pandemic. PHEAA represented to those borrowers that it would seek permission for such an extension from the NCSLTs. But PHEAA did not inform borrowers that the NCSLTs were not responding to these requests and had not substantively responded to Exception Requests since 2015. PHEAA also failed to advise some of these borrowers on other forms of payment relief that may have been readily available, such as reduced payment plans or other forms of forbearance.
11.
PHEAA and the Trusts did not substantively respond to these requests for forbearance extensions until the fall of 2020, when PHEAA denied all requests to extend COVID-related payment forbearance, after leaving borrowers without answers to their requests, or payment relief, for months.
12.
The Bureau brings this action under 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, damages, civil money penalties, and other appropriate relief for Defendants’ violations of Federal consumer financial law in connection with Defendants’ ownership Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 5 of 40
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and servicing of private student loan debt. JURISDICTION AND VENUE 13.
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. 14.
Venue is proper in this District because PHEAA is located in and does business in this District and the NCSLTs do business in this District. 12 U.S.C. § 5564(f).
PLAINTIFF 15.
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 16.
Pennsylvania Higher Education Assistance Agency (PHEAA) (d/b/a American Education Services or AES) is a public corporation organized under the laws of the Commonwealth of Pennsylvania with its Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 6 of 40
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principal office located in Harrisburg, Pennsylvania. As of December 2023, PHEAA serviced a portfolio of student loans worth roughly $17.8 billion. 17.
The National Collegiate Student Loan Trusts (NCSLTs or the Trusts) are a group of fifteen securitization trusts organized under Delaware Statutory Trusts Act, Del. Code Ann. tit. 12, §§ 3801 et seq., from 2003-2007 for the purpose of acquiring and pooling student loans, providing for their servicing and collection, and issuing and paying notes as securities backed by student loan income. By name, the Trusts are The National Collegiate Master Student Loan Trust I, The NCSLT 2003-1, The NCSLT 2004-1, The NCSLT 2004-2, The NCSLT 2005-1, The NCSLT 2005- 2, The NCSLT 2005-3, The NCSLT 2006-1, The NCSLT 2006-2, The NCSLT 2006-3, The NCSLT 2006-4, The NCSLT 2007-1, The NCSLT 2007- 2, The NCSLT 2007-3, and The NCSLT 2007-4. As of February 29, 2024, the Trusts collectively held approximately 163,000 private student loans with approximately $907 million in outstanding balances. 18.
PHEAA is a “covered person” under the CFPA, 12 U.S.C. § 5481(6)(A), because it offers or provides a “consumer financial product or service” by engaging in servicing student loans and collecting debt. 12 U.S.C. § 5481(5), (15)(A)(i), (15)(A)(x).
19.
The NCSLTs are “covered person[s]” under the CFPA, 12 U.S.C. Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 7 of 40
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§ 5481(6)(A), because they offer or provide a “consumer financial product or service” by engaging in extending credit and servicing loans, including acquiring, and purchasing private student loans, and by collecting debt. 12 U.S.C. § 5481(5), (15)(A)(i), (15)(A)(x).
FACTUAL ALLEGATIONS THE TRUSTS’ STRUCTURE 20.
For each of the NCSLTs, the rights, obligations, and powers of the Trusts’ stakeholders, as well as their relationships to each other, are defined by a series of interlocking contracts, referred to herein as the Trust Related Agreements. These include, among other agreements, a Trust Agreement, an Indenture, and an Administration Agreement. 21.
The Trust Agreement provides that the Trusts act through their Owner Trustee. The Owner Trustee, Wilmington Trust Company (Wilmington), may only act or refrain from acting, as to a non-ministerial matter, upon instruction from the Trusts’ Owners. 22.
The Trusts’ Owners hold residual or reversionary interests in the Trusts’ property (primarily, the student loans). The Owners may direct the Owner Trustee to act so long as that action is consistent with the Trust Related Agreements.
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23.
The Administration Agreement defines the role of the Administrator and provides that the Administrator will perform the duties of the Trusts and the Owner Trustee on behalf of the Trusts that are required by the Trusts’ Indenture and Trust Agreement. 24.
The Administrator for the Trusts was initially First Marblehead Data Services, Inc., who was later succeeded by Goal Structured Solutions Data Services, LLC (Goal).
25.
The Special Servicing Agreement governs the servicing and collection of non-performing loans by the Special Servicer, which was initially First Marblehead Education Resource, Inc. (FMER), but has been U.S. Bank since FMER resigned in 2012. U.S. Bank subcontracted the servicing and collection of defaulted loans to NCO Financial Systems, Inc. (NCO). NCO was succeeded by its affiliate Transworld Systems, Inc. (TSI) as the Special Subservicer.
THE RELATIONSHIP BETWEEN THE TRUSTS AND PHEAA 26.
PHEAA services performing loans for the Trusts pursuant to the Servicing Agreement. Under the Servicing Agreement, PHEAA agreed to provide certain services such as “[b]orrower communications,” “procedures for delinquency and default[,]” and disbursement. The Servicing Guidelines—appended to the Servicing Agreement as an exhibit—dictate Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 9 of 40
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how PHEAA services loans for the Trusts. Among other things, the Servicing Guidelines outline the forms of payment relief that PHEAA is authorized to offer to NCSLT borrowers, provide eligibility criteria for those options, and direct PHEAA on how and when they may be offered. 27.
Under the Servicing Agreement, PHEAA “shall provide and perform” its loan servicing “in full compliance with[,]” among other things, the Servicing Agreement, the Servicing Guidelines, and all laws applicable to PHEAA and the Trusts.
28.
The Servicing Agreement gives the Trusts the right to direct, among other things, the form and substance of PHEAA’s correspondence to borrowers, criteria for assessment of late fees, and PHEAA’s engagement of subcontractors to perform its services. The Servicing Agreement also gives the Trusts the right to audit all of PHEAA’s records related to servicing of NCSLT loans.
THE SERVICING GUIDELINES AND BORROWER EXCEPTION REQUESTS
29.
The Servicing Guidelines provide criteria for PHEAA or the loans’ former guarantor, The Educational Resources Institute Inc. (TERI), to grant various forms of borrower requests, such as requests for deferment, forbearance, or temporary modified repayment. Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 10 of 40
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30.
For borrower requests that fall outside the scope of PHEAA or TERI’s authority, the Servicing Guidelines further provide that exceptions may be made if they are approved in writing by TERI or TERI’s agent, the current owner of the loan, and the Servicer. 31.
When a borrower asks for something that PHEAA lacks authority to grant it refers to the borrower’s request as an Exception Request. These can arise because the Servicing Guidelines explicitly call for TERI’s approval (such as for a co-signer release) or because the Servicing Guidelines do not specifically address the relief sought. Exception Requests generally involve some form of borrower payment relief such as requests for a co-signer release, extension of forbearance or deferment beyond the time permitted in the Servicing Guidelines, settlement, loan forgiveness, Servicemember Civil Relief Act (SCRA) benefits, or other forms of payment or interest rate reduction.
32.
TERI declared bankruptcy in 2008, after which, the Trusts, acting through their Administrator, instructed PHEAA how to service their loans through a series of Read and Agreed Letters, issued between 2008 and 2012, that amended the Servicing Guidelines. 33.
A November 5, 2008 Read and Agreed Letter directed that Exception Requests should be sent to FMER, rather than TERI, for Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 11 of 40
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decision. Once NCO had assumed FMER’s role as Special Servicer in 2012, PHEAA began sending Exception Requests to NCO. From 2012 until 2015, NCO decided Exception Requests and either PHEAA or NCO communicated the decision to borrowers.
34.
From 2015 to 2021, PHEAA received thousands of borrower requests about NCSLT loans. Some common types of borrower requests during this period included requests for: (1) co-signer release, (2) temporary modified repayment and hardship forbearance, (3) natural disaster forbearance, (4) deferment, (5) loan settlement or forgiveness, and (6) SCRA benefits.
Co-Signer Release 35.
Many private student loan borrowers have co-signers—often the borrower’s parent, spouse, or other relative—who share responsibility for the debt with the student borrower. Some NCSLT loans include provisions allowing for a co-signer to be released from the debt obligation after the borrower meets certain criteria.
36.
The Servicing Guidelines enumerate a multi-step approval process for co-signer release applications. First, PHEAA must confirm that the loan meets threshold eligibility criteria, including loan type and year of issuance. PHEAA must then review the loan payment history to ensure that Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 12 of 40
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the borrower has made 48 consecutive on-time payments and has no prior uses of forbearance. Lastly, the borrower must meet the credit criteria, which includes but is not limited to, having no delinquencies greater than 60 days in the past two years. Prior to declaring bankruptcy, TERI completed the step of determining credit eligibility. Thus, PHEAA would screen the loan for threshold eligibility, deny co-signer release requests that did not satisfy the threshold requirements, and thereafter send eligible cosigner release requests that satisfied the threshold requirements to TERI— and later to FMER, and then to NCO—for credit review and final determination as an Exception Request.
Temporary Modified Repayment and Hardship Forbearance 37.
When borrowers requested assistance because they were struggling to afford their monthly payments, PHEAA might be able to offer one of several modified repayment or forbearance options under the Servicing Guidelines and their Read and Agreed Letter amendments. 38.
PHEAA could offer borrowers a Reduced Payment Plan (RPP). Under this option, PHEAA would elicit a proposed monthly payment amount from the borrower that had to exceed a required minimum. Borrowers could use an RPP for up to 24 months in three-month Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 13 of 40
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increments, but the combined total time in an RPP or on a hardship forbearance could not exceed 24 months over the life of the loan. 39.
PHEAA could also offer borrowers a Modified Graduated Repayment Schedule (MGRS). Under this option, a borrower would pay 50% of the regular monthly payment for 12 months, and then make interest-only payments for 12 months. PHEAA could approve an MGRS plan for a borrower in addition to the 24 months permitted for the combination of RPP and hardship forbearance. 40.
Hardship forbearance was available to borrowers in 3-month increments for a maximum of 12 months over the lifetime of the loan. During hardship forbearance, interest on the loans accrued and was capitalized when it ended.
41.
The Servicing Guidelines and Read and Agreed Letters dictated the order in which PHEAA should offer these options to borrowers struggling to make regular payments. As of 2011, they directed PHEAA to: (1) ask a borrower if a loan’s co-signer can make the payments, (2) offer an MGRS, (3) offer an RPP, and (4) offer hardship forbearance. 42.
When borrowers requested payment relief that exceeded these parameters, PHEAA’s practice was to send such requests to NCO as an Exception Request.
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Natural Disaster Forbearance 43.
When a borrower’s home or employment is affected by a natural disaster, the Servicing Guidelines allow the servicer to grant up to three months of Natural Disaster Forbearance (NDF). 44.
If a borrower affected by a natural disaster needs any continuation of forbearance beyond the three-month NDF, the Servicing Guidelines require the borrower to request a hardship forbearance. Deferment 45.
The Servicing Guidelines include various forms of deferment for borrowers in certain stages of life, such a borrower in school or medical residency.
46.
Members of the U.S. Armed Forces in active-duty status can receive a deferment of up to 36 months. 47.
When borrowers requested deferment that exceeded the parameters in the Servicing Guidelines, PHEAA’s practice was to send such requests to NCO as an Exception Request. Loan Settlement or Forgiveness 48.
The Servicing Guidelines provide no instructions regarding settlement or forgiveness for performing loans. Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 15 of 40
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49.
When borrowers requested loan settlement or forgiveness, PHEAA’s practice was to send such requests to NCO as an Exception Request.
The Servicemembers Civil Relief Act 50.
The Servicing Guidelines provide no instructions regarding SCRA benefits.
51.
The SCRA caps the interest rate for loans to servicemembers on active duty at 6%. See 50 U.S.C. § 3937(a). The interest rate cap applies to loans that were taken out before the active-duty period began, and the servicemember is to invoke the benefit no later than 6 months after the active-duty period ends. See 50 U.S.C. § 3937(a)(1), (b)(1)(A). In lieu of notice from the borrower, a creditor may use information retrieved from a database managed by the Department of Defense, the Defense Manpower Data Center, indicating that the servicemember is on active duty. See 50 U.S.C. § 3937(b)(1)(B).
52.
It was PHEAA’s practice to regularly check whether borrowers were on active duty status by accessing the Defense Manpower Data Center, and to send an Exception Request for: (1) borrowers who had not invoked benefits but were eligible for them, (2) borrowers who had invoked benefits Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 16 of 40
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more than six months after the end of active duty service, and (3) borrowers who took out a loan while in active duty status. THE TRUSTS’ REFUSAL TO DECIDE EXCEPTION REQUESTS 53.
Beginning in or around 2014, a series of disputes between the Trusts’ Owners and the various other NCSLT-related entities resulted in several lawsuits. Among other topics, the parties disputed how certain authorities and decision-making rights were distributed among the Trusts’ stakeholders, and which stakeholders could issue directions to others regarding certain Trust operations.
54.
Up until October 2015, when an NCSLT borrower or co-signer made a request that PHEAA did not have authority to approve under the Servicing Guidelines, PHEAA’s practice was to send that request to TERI or TERI’s successor—first FMER, then NCO—for decision as an Exception Request.
55.
On October 20, 2015, the Trusts, acting through the Wilmington, sent a letter to PHEAA which advised that NCO lacked the authority to act on behalf of the Trusts and stated that the only parties empowered to give PHEAA direction under the Servicing Agreement were the Owners or the Trusts through the Owner Trustee. Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 17 of 40
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56.
In response, on October 27, 2015, PHEAA began sending borrower Exception Requests by e-mail to Wilmington as the Owner Trustee.
57.
On November 2, 2015, the Trusts, acting through Wilmington, sent PHEAA a letter which stated that “neither the Owners, the Trusts, nor the Owner Trustee have the obligation or duty to respond” to Exception Requests, referencing “those certain emails sent by PHEAA to the Trusts care of Wilmington Trust Company in reference to various borrower exception requests[.]”
58.
On November 6, 2015, PHEAA sent a letter to Wilmington seeking clarification on how it should handle Exception Requests and whether it should resume sending Exception Requests to NCO for decision. PHEAA’s November 6, 2015 letter further stated that it would continue to send Exception Requests to the Trusts via the Owner Trustee until it received alternative direction.
59.
The Trusts did not respond to PHEAA’s November 6, 2015 letter through the Owner Trustee. Instead, on November 21, 2015, Chaitman LLP, which represented itself as “special litigation counsel [to] the Trusts[,]” sent PHEAA a letter in response stating, “as to your inquiry regarding exceptions, it is not within the Trusts’ power to grant or withhold Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 18 of 40
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them, nor within my purview to counsel PHEAA on how, in accordance with its applicable undertakings, it should deal with obtaining them.” 60.
On December 9, 2015, in response to PHEAA’s continued emails to Wilmington containing Exception Requests, a Wilmington executive replied by email stating that the Owner Trustee “does not have the authority to decide/comment on matters regarding loans held in the trusts.”
61.
PHEAA continued to send Exception Requests by e-mail to Wilmington in its capacity as Owner Trustee. And consistent with its representations to PHEAA, Wilmington did not substantively respond to the Exception Requests it received; neither did the Trusts. 62.
On August 27, 2020, a Delaware chancery court issued a ruling that addressed many of the NCSLT-related entities’ disputes over their respective authority to direct the Trusts. 63.
There was no further communication from the Trusts on the resolution of Exception Requests until at least November 2020. 64.
On November 23, 2020, the Trusts, acting through the Owner Trustee, sent a letter (November 2020 direction letter) to PHEAA and Goal delegating to Goal as the Administrator “the authority to act on behalf of the Trusts with respect to decisions and/or resolutions with respect to Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 19 of 40
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Exception Requests and related servicing instructions[.]” The November 2020 direction letter directed PHEAA to forward Exception Requests to Goal, which could forward such requests to a designated special subservicer, such that “Exception Requests shall be processed and/or student borrowers’ questions attended to in a timely manner. . . ” 65.
PHEAA responded by letter confirming its agreement and that the instructions in the November 2020 direction letter “shall hereafter comprise a part of the Servicing Guidelines.” 66.
On April 19, 2021, Goal sent a letter to PHEAA, which rejected the Trusts’ November 2020 direction letter and stated that Goal was taking no action to process Exception Requests. But Goal’s letter also opined that, “many of the situations PHEAA has labeled as Exception Requests are not exceptions or are expressly prohibited by the transaction documents and can be handled directly by PHEAA without the involvement of any other transaction party.”
67.
Acting in accordance with the Trusts’ November 2020 direction letter, PHEAA interpreted this April 2021 letter as a direction from the Administrator concerning Exception Requests. 68.
PHEAA overhauled its process for borrower Exception Requests in May 2021, in accordance with its interpretation of Goal’s April 2021 Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 20 of 40
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direction letter. For nearly all types of borrower requests that PHEAA had previously classified as Exception Requests and sent to NCO or Wilmington, PHEAA now instructs its employees to approve or deny those requests for exception from the Servicing Guidelines. For co-signer release requests that meet the threshold eligibility requirements, PHEAA representatives now send those requests to Special Subservicer TSI for decision.
69.
Until at least May 2021, PHEAA continued to send Exception Requests to the Trusts despite knowing since at least November 2015 that the Trusts would not respond to them.
70.
PHEAA addressed the backlog of many pending Exception Requests in accordance with its interpretation of Goal’s April 2021 direction letter. For loans it still serviced, PHEAA denied most pending requests for forgiveness, settlement, extensions of deferment or forbearance, or other forms of payment relief. 71.
PHEAA approved most pending requests for SCRA benefits, and retroactively applied the 6% interest rate cap to eligible borrowers. But for some SCRA borrowers, this relief came too late. Dozens of borrowers whose SCRA Exception Requests were not answered, but who were likely Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 21 of 40
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eligible for an SCRA interest rate reduction, defaulted on their payments and had their loans charged-off.
72.
TSI began deciding new requests for co-signer release on behalf of the NCSLTs in October 2021. Nearly all co-signer release requests made between at least October 2015 and October 2021 were never decided and remain pending.
73.
Between 2015 and 2021, the Trusts failed to timely respond to Exception Requests from at least 5,390 borrower accounts. PHEAA’S REPRESENTATIONS TO BORROWERS ABOUT EXCEPTION REQUESTS
74.
It was PHEAA’s practice to advise borrowers that submitted a request that their request would be reviewed within 7-10 business days. PHEAA would then send these individual requests to the Trusts, via Wilmington, by e-mail as Exception Requests. Once an individual Exception Request had been pending with Wilmington for ten days, PHEAA automatically generated a letter to the borrower which stated “Please be advised that this exception request was forwarded to the owner of your student loan for a determination. As of today’s date, the owner of your loan has not provided a response to this request.” This closed the task in PHEAA’s system, so borrowers would receive no further communications Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 22 of 40
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about the request unless they contacted PHEAA to ask again about the status of their request.
75.
When a borrower called PHEAA back to follow-up on the status of an Exception Request to which the borrower had never received a substantive response, PHEAA’s customer service representatives responded by offering to submit a new Exception Request to the Trusts for review. This started the cycle over again.
76.
PHEAA did not inform borrowers that the Trusts’ process for deciding Exception Requests was non-functional, or that the Trusts were not deciding Exception Requests, and thus their Exception Request would not be answered. This obscured from borrowers the underlying circumstances relevant to their financial obligations and deprived them of material information with which to make important personal financial decisions.
77.
Beginning in approximately March 2020, if a borrower sought to contact their loan holder directly, often for the purpose of escalating their pending Exception Request, PHEAA’s policy and procedure was to provide borrowers with contact information for Wilmington. In or around January 2021, PHEAA began providing borrowers with contact information for Goal, instead of Wilmington.
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78.
Wilmington and Goal did not substantively respond to borrower requests for information about their loans and would not confirm that they had any records of the borrowers’ loans. 79.
PHEAA’s practice of referring borrowers to Wilmington and Goal caused immense confusion and frustration when consumers wasted their time trying to obtain information about their loan from Wilmington or Goal at PHEAA’s direction.
80.
PHEAA was aware of the harm this practice was causing consumers because Wilmington explicitly instructed PHEAA to stop referring borrowers to it. By email in September 2020, an attorney for Wilmington—which is a wholly-owned subsidiary of M&T Bank—told PHEAA’s outside counsel: “another NCSLT Borrower with unfortunate circumstances has gotten in contact with M&T only to be frustrated when there is nothing they can do for her…. Please tell your client to stop referring NCSLT borrowers to [Wilmington]/M&T….” 81.
Consumers also complained directly to PHEAA customer service representatives that they had wasted their time and were getting the run around when they contacted Wilmington at PHEAA’s direction. Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 24 of 40
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FORBEARANCE FOR THE COVID-19 PANDEMIC 82.
After the President of the United States declared a national emergency for the COVID-19 pandemic beginning on March 1, 2020, PHEAA began to receive requests for payment relief from NCSLT borrowers impacted by COVID-19.
83.
On March 20, 2020, PHEAA sought guidance from Wilmington as to whether COVID-19 could be considered a natural disaster under the Servicing Guidelines, such that borrowers impacted by COVID-19 could be provided up to three months of natural disaster forbearance. 84.
Wilmington replied on March 23, 2020, that it had no authority to provide guidance on PHEAA’s interpretation of the Servicing Guidelines. PHEAA did not receive any external guidance as to whether COVID could be considered a natural disaster.
85.
On March 27, 2020, PHEAA directed its employees that borrowers impacted by COVID could qualify for natural disaster forbearance.
86.
PHEAA denied at least 323 requests for COVID-related natural disaster forbearance on or before March 27, 2020. PHEAA did not timely respond to an additional at least 216 borrower requests for COVID-related natural disaster forbearance.
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87.
On or after March 27, 2020, PHEAA began approving COVIDrelated natural disaster forbearance requests but did not undertake a lookback review that systematically corrected any injury to borrowers whose requests for forbearance might have been denied, or improperly recorded, prior to March 27, 2020.
88.
The Servicing Guidelines do not provide for an extension of natural disaster forbearance. Instead, the Servicing Guidelines dictate that a borrower seeking further payment relief after application of a threemonth natural disaster forbearance is required to use hardship forbearance, if available.
89.
Despite this fact, when borrowers impacted by COVID-19 requested an extension of their forbearance, PHEAA told these borrowers it would ask the owners of their loans (the NCSLTs) for an extension of their natural disaster forbearance through an Exception Request, and they should expect a response within 7-10 business days. PHEAA did not inform these borrowers that the NCSLTs had not responded to Exception Requests since 2015.
90.
PHEAA customer service representatives often failed to inform these consumers whether they had any remaining payment relief options under the Servicing Guidelines—such as hardship forbearance or Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 26 of 40
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temporary modified repayment—while they waited for a response from the NCSLTs to their requests for extension of natural disaster forbearance—a response PHEAA knew or should have known was not forthcoming. 91.
In some instances, PHEAA customer service representatives informed consumers of their other options for payment relief but encouraged consumers, either explicitly or implicitly, to wait on a response to the forbearance extension request, rather than applying for other relief options. In the meantime, these borrowers were left responsible for their full monthly payments once their three months of natural disaster forbearance expired.
92.
By the spring of 2020, the Trusts had not responded to any of the Exception Requests that PHEAA had sent to the Owner Trustee during the previous four-and-a-half years. Nevertheless, PHEAA created a list of borrowers seeking COVID-related forbearance extensions and contacted first Wilmington, and then Goal, for guidance. PHEAA effectively treated requests for extension of COVID-related forbearance as Exception Requests, but it did not send the individual COVID-related forbearance extension requests to Wilmington as it did with other Exception Requests. 93.
On July 21, 2020, Goal responded to PHEAA’s request for guidance with a disclaimer that it “cannot provide direction to AES, or Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 27 of 40
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provide a legal interpretation of the servicing guideline provisions[,]” but then followed with several arguments in favor of granting requests for extension of COVID-related natural disaster forbearance. 94.
In or about August 2020, having received no definitive direction or authority to extend COVID-related natural disaster forbearance, PHEAA decided to deny all NCSLT borrowers’ COVID-related forbearance extension requests. But it took PHEAA an additional two to four months to convey this decision to most borrowers who were waiting for responses to their forbearance extension requests. 95.
On August 27, 2020, PHEAA provided guidance to employees instructing them that they could not extend COVID-related forbearances and Exception Requests should not be created for borrowers impacted by COVID-19 who asked for more forbearance time. PHEAA advised its employees to assess the requesting borrower for all other available options such as another repayment schedule or forbearance. 96.
In the first five months of the COVID-19 pandemic, PHEAA received approximately 5,082 requests for extension of COVID-related forbearance before it issued the August 27, 2020 guidance directing staff to stop accepting these requests. PHEAA denied the backlog of requests from Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 28 of 40
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late August to December 2020, denying 3,111 forbearance extension requests in bulk on October 17, 2020.
97.
When PHEAA denied a request for COVID-related forbearance extension, it sent a letter to the borrower stating that the “Request to Extend Natural Disaster Forbearance…is no longer being offered for COVID-19 hardships. Other relief options may be available. Please contact us for assistance in regards to your COVID-19 hardship.” Most borrowers were not sent this denial letter until between two and six months after their requests for forbearance extension.
98.
Prior to sending denial letters, PHEAA also sent 1,373 letters to borrowers while their requests for an extension of COVID-related forbearance were pending, which stated: “Please be advised that this exception request was forwarded to the owner of your student loan for a determination. As of today’s date, the owner of your loan has not provided a response to this request.” These two sentences were the entire content of the letters. These pending application letters did not inform borrowers that other relief options might be available, such as hardship forbearance or temporary modified repayment.
99.
In phone calls to PHEAA during June, July, and August 2020, borrowers grew increasingly frustrated when they received no response to Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 29 of 40
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their requests for payment relief and were forced to call PHEAA to ask whether they had to make an upcoming loan payment. PHEAA failed to give these borrowers an answer before their initial forbearance ended and their payments came due. PHEAA deprived these borrowers of critical information necessary to make important personal financial decisions, including how to prioritize bills and necessities while these consumers were impacted by the pandemic.
VIOLATIONS OF THE CONSUMER FINANCIAL PROTECTION ACT
100. 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).
101. 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).
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COUNT I—DECEPTIVE ACTS OR PRACTICES (Against PHEAA) Misrepresenting that Exception Requests Would Be Answered
102. Plaintiff incorporates and realleges the allegations in Paragraphs 1–99.
103. PHEAA’s acts of accepting borrower requests, representing to borrowers that their request had been forwarded to their lender, and directing borrowers seeking to escalate their pending Exception Requests to contact Wilmington and Goal—combined with its failure to inform borrowers that the Trusts were not responding to Exception Requests— were likely to mislead reasonable borrowers. Borrowers were led to believe that they would eventually receive a substantive response to their Exception Requests from the Trusts and that efforts to make an Exception Request and contact Wilmington or Goal were not wastes of time. 104. PHEAA’s misrepresentations were material. Exception Requests were largely requests by borrowers and co-signers for some form of payment relief or release from the loan. A decision on a pending Exception Request implicated the amount borrowers would be obligated to pay toward their loans. Information concerning a consumer’s payment obligation is material as it impacts the consumer’s conduct in repaying their Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 31 of 40
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loan.
105. PHEAA therefore has engaged in deceptive acts or practices by misrepresenting to borrowers that their Exception Request would receive a substantive response in violation of the CFPA. 12 U.S.C. §§ 5531, 5536(a)(1)(B).
COUNT II—DECEPTIVE ACTS OR PRACTICES (Against the NCSLTs) Vicarious Liability for PHEAA’s Misrepresentations that Exception Requests Would Be Answered
106. Plaintiff incorporates and realleges the allegations in Paragraphs 1–99.
107. PHEAA made material misrepresentations and omissions regarding Exception Requests in its role as the Trusts’ servicer and as the Trusts’ agent that misled or were likely to mislead borrowers acting reasonably under the circumstances.
108. PHEAA is an agent of the Trusts pursuant to the Servicing Agreement. In accordance with the terms of the Servicing Agreement, the Trusts do not interface directly with non-defaulted borrowers and instead contract with PHEAA as the servicer to interface directly with those borrowers on their behalf. The Servicing Agreement and the Servicing Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 32 of 40
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Guidelines govern how PHEAA services loans held by the Trusts. 109. PHEAA acted with actual or apparent authority from the Trusts in its handling of Exception Requests and communication to borrowers about those requests.
110. As the Trusts’ loan servicer, PHEAA was the known agent of the Trusts and had been cloaked with apparent authority to speak on behalf of the Trusts. Borrowers had no reason to doubt that PHEAA was acting within its authority to submit Exception Requests to the loan owner and provide contact information for Wilmington or Goal on behalf of the Trusts. 111. The Trusts are liable for their agent PHEAA’s material misrepresentations that were likely to mislead consumers to believe that their Exception Requests would receive a substantive response and that efforts to make an Exception Request and contact Wilmington or Goal were not wastes of time.
112. Defendants therefore have engaged in deceptive acts or practices in violation of the CFPA by misrepresenting to borrowers that their Exception Request would receive a substantive response. 12 U.S.C. §§ 5531, 5536(a)(1)(B).
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COUNT III—UNFAIR ACTS OR PRACTICES (Against the NCSLTs) Failing to Instate a Functioning Process for Deciding Exception Requests
113. Plaintiff incorporates and realleges the allegations in Paragraphs 1–99.
114. 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).
115. In October 2015, the Trusts, acting through the Owner Trustee, directed PHEAA to terminate the existing Exception Request process by which borrower requests for various forms of payment relief were processed and substantively answered.
116. The Trusts’ failure to instate a new Exception Request process was likely to cause substantial injury to borrowers as Exception Requests for various forms of relief, including payment relief, went unanswered for several years. Borrowers were harmed when they were required to expend time and energy to follow-up with PHEAA, and in some instances Goal and Wilmington, concerning the status of their pending Exception Requests. Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 34 of 40
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Borrowers were also injured by the resulting uncertainty and inability to plan financially or make informed financial decisions. 117. Some consumers suffered further consequential harms when they did not get relief for which they were eligible, such as co-signers who remained liable for student loan obligations even though they were eligible for release from the debt under the Servicing Guidelines and servicemembers on active duty who did not have the SCRA interest cap applied to their loans, and thus were charged excessive, unlawful interest. 118. The injury to borrowers was unavoidable because borrowers had no control over whether the Trusts had a functioning process to respond to Exception Requests and were not aware that Exception Requests were not being decided.
119. The injury to borrowers is not outweighed by countervailing benefits to consumers or to competition.
120. Therefore, the Trusts’ acts or practices constitute unfair acts or practices in violation of sections 1031 and 1036 of the CFPA. 12 U.S.C. §§ 5531, 5536(a)(1)(B).
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COUNT IV—UNFAIR ACTS OR PRACTICES (Against PHEAA) Failing to Grant Natural Disaster Forbearance for COVID-19
121. Plaintiff incorporates and realleges the allegations in Paragraphs 1–99.
122. PHEAA’s denial of, or failure to timely respond to, eligible borrower requests for COVID-related natural disaster forbearance was likely to cause substantial injury to borrowers because it required them to make payments, or become delinquent on their loans, when they should have been entitled to a payment pause.
123. This injury was not reasonably avoidable by consumers because borrowers who were eligible for COVID-related natural disaster forbearance under the Servicing Guidelines were not aware of their eligibility or that their request for COVID-related natural disaster forbearance had been improperly denied or delayed in receiving approval. 124. This injury is not outweighed by countervailing benefits to consumers or to competition.
125. Therefore, PHEAA’s denial of, or failure to timely respond to, COVID-related natural disaster forbearance constitutes unfair acts or practices in violation of the CFPA. 12 U.S.C. §§ 5531, 5536(a)(1)(B). Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 36 of 40
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COUNT V—UNFAIR ACTS OR PRACTICES (Against PHEAA) Failing to Inform Borrowers Seeking COVID-19 Forbearance Extensions of their Payment Relief Options and that the NCSLTs Did Not Have a Functioning Exception Request Process
126. Plaintiff incorporates and realleges the allegations in Paragraphs 1–99.
127. PHEAA’s failure to inform borrowers seeking an extension of COVID-related forbearance that the NCSLTs did not have a functioning Exception Request process, and failure to inform borrowers whether they had other payment relief options available, was likely to cause substantial injury to consumers.
128. Consumers who were eligible for other forms of payment relief, such as hardship forbearance, likely suffered substantial injury when they did not get the payment relief for which they were eligible. They were required to make payments they could not afford, or become delinquent on their loans, when they should have been entitled to a payment pause. Borrowers were also harmed when they were required to expend time and energy to follow-up with PHEAA concerning the status of their pending request for a forbearance extension. And borrowers were likely injured by the resulting uncertainty and inability to plan financially or make informed Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 37 of 40
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financial decisions while they were impacted by the pandemic. 129. This injury was not reasonably avoidable as borrowers were not aware that the Servicing Guidelines might provide other forms of payment relief such as hardship forbearance or temporary modified repayment. Borrowers also did not know that the Trusts had not responded to Exception Requests since 2015.
130. This substantial injury was not outweighed by countervailing benefits to consumers or to competition.
131. Therefore, PHEAA’s failure to assess borrowers seeking an extension of COVID-related forbearance for all payment relief options, and failure to inform these borrowers that the NCSLTs did not have a functioning process to respond to their Exception Requests, constitute unfair acts or practices in violation of sections 1031 and 1036 of the CFPA. 12 U.S.C. §§ 5531, 5536(a)(1)(B).
THIS COURT’S POWER TO GRANT RELIEF 132. 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 Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 38 of 40
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functions of Defendants, and civil money penalties. 12 U.S.C. § 5565(a)(2). 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 133.
Wherefore, the Bureau requests that the Court: a.
Permanently enjoin Defendants from committing future violations of the CFPA;
b.
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: i. Retrospective injunctive relief;
ii. 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;
c.
Award the Bureau civil money penalties; and d.
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: May 6, 2024
Respectfully submitted,
Eric Halperin Enforcement Director
Deborah Morris Deputy Enforcement Director
Michael P. Favretto Assistant Deputy Enforcement Director
/s/ Adrienne Warrell _ Adrienne Warrell (NY 5361092) 202-435-7189 [email protected]
Gabriel Hopkins (NY 5242300) 202-435-7842 [email protected]
Tiffany Hardy (NY 4074142) 202-435-9375 [email protected]
Enforcement Attorneys
1700 G Street NW Washington, DC 20552 Facsimile: (202) 435-7722
Attorneys for the Consumer Financial Protection Bureau Case 1:24-cv-00756-JPW Document 1 Filed 05/06/24 Page 40 of 40
Stipulation ()
PDF of this document (60 pages)
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UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff,
v.
PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY, THE NATIONAL COLLEGIATE MASTER STUDENT LOAN TRUST I, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2003-1, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2004-1, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2004-2, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-1, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-2, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-3, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006- 1, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-2, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006- 3, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-4, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007- 1, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-2, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007- 3, and THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-4,
Defendants.
Case No.
1:24-cv-00756-JPW
STIPULATED FINAL JUDGMENT AND ORDER AS TO NCSLT DEFENDANTS
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The Consumer Financial Protection Bureau (“Bureau”) commenced this civil action on May 6, 2024 to obtain injunctive and monetary relief and civil penalties from The National Collegiate Master Student Loan Trust I, The National Collegiate Student Loan Trust 2003-1, The National Collegiate Student Loan Trust 2004-1, The National Collegiate Student Loan Trust 2004-2, The National Collegiate Student Loan Trust 2005-1, The National Collegiate Student Loan Trust 2005-2, The National Collegiate Student Loan Trust 2005-3, The National Collegiate Student Loan Trust 2006-1, The National Collegiate Student Loan Trust 2006-2, The National Collegiate Student Loan Trust 2006-3, The National Collegiate Student Loan Trust 2006-4, The National Collegiate Student Loan Trust 2007-1, The National Collegiate Student Loan Trust 2007-2, The National Collegiate Student Loan Trust 2007-3, The National Collegiate Student Loan Trust 2007-4 (collectively “NCSLTs” or “the Trusts”), and Pennsylvania Higher Education Assistance Agency (“PHEAA”), also doing business as American Education Services (“AES”). The Complaint alleges 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 owned by the Trusts.
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The Bureau and NCSLT Defendants agree to entry of this Stipulated Final Judgment and Order (“Order”), without adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint.
The Bureau and Defendant PHEAA have agreed to simultaneous entry of a separate Stipulated Final Judgment and Order (“Defendant PHEAA Order”). The requirements of Section IV (Order to Pay Redress) of this Order and the requirements of Section V (Order to Pay Redress) of the Defendant PHEAA Order together represent the complete terms for liability for consumer redress and should not be interpreted as duplicative requirements.
FINDINGS 1.
This Court has personal jurisdiction over the parties and jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1331 and 28 U.S.C. § 1345.
2.
NCSLT Defendants neither admit nor deny the allegations in the Complaint, except as specified in this Order. Only for purposes of this action, NCSLT Defendants admit the facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action. Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 3 of 60
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3.
NCSLT Defendants waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order and 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 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 Consumer” means any Student Borrower or Cosigner for an NCSLT Loan that submitted an Affected Request and any Delayed Response Affected Consumer. i. “Delayed Response Affected Consumer” means any Student Borrower for an NCSLT Loan that had an Exception Request made on or after January 1, 2015, that: (1) remains pending, or (2) was not decided within 30 days of the date of the request. b. “Affected Request” means:
i. Requests for Co-Signer Release; Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 4 of 60
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ii. Requests for COVID-related Natural Disaster Forbearance;
iii. Requests for Extension of COVID-related Payment Relief;
iv. Requests for SCRA Benefits; and v. Exception Requests for miscellaneous relief that do not fall into the above categories (“Requests for Miscellaneous Exceptions”).
c. “Borrower Request” means any request by a Student Borrower or Co-signer made on or after the Effective Date concerning an NCSLT Loan.
d. “Consumer Reporting Agency” or “CRA” means the definition set forth in 15 U.S.C. § 1681a(f). e. “Co-signer” means an obligor on an NCSLT Loan other than a Student Borrower.
f. “Co-signer Release” means release of a Co-signer from all obligations of an NCSLT Loan.
g. “COVID-19 Emergency” means the national emergency concerning the novel coronavirus disease (COVID-19) outbreak, declared by the President as beginning on March 1, Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 5 of 60
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2020, under the National Emergencies Act, 50 U.S.C. § 1601 et seq., and any extensions of that emergency. h. “Date of First Delinquency” means the date of the first 30day delinquency that led to a status or rating indicating the NCSLT Loan is not current and has not again become current, or in the case of bankruptcies or personal receivership, the date of the bankruptcy or personal receivership petition or notification. i. “Date Transaction Effective” means the data point in Defendant PHEAA’s system of record reflecting the historical date on which a retroactive transaction or other loan account adjustment should have taken effect. j. “Defendants” means the NCSLT Defendants and Defendant PHEAA, and their respective successors and assigns. k. “Defendant PHEAA” means Pennsylvania Higher Education Assistance Agency, d/b/a American Education Services, and its successors and assigns.
l. “Distribution Date” means: (i) for the Monthly Pay NCSLT Defendants, the 25th calendar day or if such day is not a business day, the next business day thereafter of each Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 6 of 60
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month; (ii) for The National Collegiate Student Loan Trust 2003-1, 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; and (iii) for The National Collegiate Student Loan Trust 2004-1 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.
m. “Effective Date” means the date on which this Order is entered by the Court.
n. “Elevated Borrower Request” means a sufficiently documented Borrower Request that Defendant PHEAA elevates for decision by an NCSLT-related Entity or, with respect to Borrower Requests for Co-signer Release only, by the Special Subservicer, under the amendments to the Servicing Guidelines described in paragraph 7 of this Order, or as they may be modified consistent with paragraph 9 of this Order.
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o. “Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or their delegate.
p. “Exception Request” means any request by a Student Borrower or Co-signer made before the Effective Date that: i. at the time of the request, Defendant PHEAA lacked the authority to decide under the Servicing Guidelines, asserted it lacked the authority to decide under the Servicing Guidelines, or sent to another entity for decision, as provisionally identified during the Bureau’s investigation, and subject to validation and non-objection by the Bureau as described in paragraph 18; or ii. was for any form of payment relief due to the COVID- 19 Emergency that was eligible for a Natural Disaster Forbearance, as provisionally identified during the Bureau’s investigation, and subject to validation and non-objection by the Bureau as described in paragraph 18.
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q. “Exception Type” means Defendant PHEAA’s categorization of the relief sought through an Exception Request. r. “Monthly Pay NCSLT Defendants” means NCSLT Defendants other than Quarterly Pay NCSLT Defendants. The Monthly Pay NCSLT Defendants 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.
s. “Natural Disaster Forbearance” means the 3-month forbearance for borrowers whose home or place of employment has been affected by a natural disaster made available to borrowers under the Servicing Guidelines. t. “NCSLT Defendants” means (1) The National Collegiate Master Student Loan Trust I, (2) The National Collegiate Student Loan Trust 2003-1, (3) The National Collegiate Student Loan Trust 2004-1, (4) The National Collegiate Student Loan Trust 2004-2, (5) The National Collegiate Student Loan Trust 2005-1, (6) The National Collegiate Student Loan Trust 2005-2, (7) The National Collegiate Student Loan Trust 2005-3, (8) The National Collegiate Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 9 of 60
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Student Loan Trust 2006-1, (9) The National Collegiate Student Loan Trust 2006-2, (10) The National Collegiate Student Loan Trust 2006-3, (11) The National Collegiate Student Loan Trust 2006-4, (12) The National Collegiate Student Loan Trust 2007-1, (13) The National Collegiate Student Loan Trust 2007-2, (14) The National Collegiate Student Loan Trust 2007-3, (15) The National Collegiate Student Loan Trust 2007-4, collectively or individually, and their respective successors and assigns. u. “NCSLT Loan” means any private student loan that is or was owned, held by, or securitized by the NCSLT Defendants. v. “NCSLT-related Entity” means any of the following entities in relation to any of the NCSLT 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 securitization documents. w. “Negative Information” means any period of 30-day delinquency, or greater, at any point in an NCSLT Loan’s history.
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x. “Note Insurer” means the note insurer for The National Collegiate Master Student Loan Trust I, The National Collegiate Student Loan Trust 2007-3, and The National Collegiate Student Loan Trust 2007-4. y. “Period of Military Service” means the definition in the Servicemembers Civil Relief Act, 50 U.S.C. § 3911(2)-(3). z. “Quarterly Pay NCSLT Defendants” means The National Collegiate Student Loan Trust 2003-1 and The National Collegiate Student Loan Trust 2004-1, which are quarterlypay 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.
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aa. “Related Consumer Action” means an affirmative private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against any NCSLT Defendant based on substantially the same facts as described in the Complaint. bb.
“Request for Co-signer Release” means any Exception Request for Co-Signer Release, made on or after January 1, 2015, that:
i. remains pending;
ii. was not decided within 30 days of the date of the request; or iii. was denied before November 1, 2021. cc. “Request for COVID-related Natural Disaster Forbearance” means any Exception Request for any form of payment relief because of the COVID-19 Emergency that was eligible for a Natural Disaster Forbearance, made on or after March 1, 2020, that:
i. remains pending;
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ii. was denied, and was not subsequently approved (without requiring resubmission of a new request) within 15 days of the date of the request; or iii. was approved, but not decided within 15 days of the date of the request.
dd.
“Request for Extension of COVID-related Payment Relief” means any Exception Request for any form of payment relief because of the COVID-19 Emergency—except for a Request for COVID-related Natural Disaster Forbearance—made on or after March 1, 2020, that:
i. remains pending;
ii. was approved, but not decided within 30 days of the date of the request; or iii. was denied, but not decided within 30 days of the date of the request; and 1. the NCSLT Loan was eligible for another form of payment relief on the date of the request; and 2. the NCSLT Loan did not enter into another form of payment relief within 30 days of the date of the request.
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ee. “Request for Miscellaneous Exception” means any Exception Request—except for a Request for Co-Signer Release, Request for COVID-related Natural Disaster Forbearance, Request for Extension of COVID-related Payment Relief, and Request for SCRA Benefits—made on or after January 1, 2015, that:
i. remains pending, or ii. was not decided within 30 days of the date of the request.
ff. “Request for SCRA Benefits” means any Exception Request for SCRA Benefits, or a request for SCRA Benefits generated by Defendant PHEAA’s identification of a servicemember’s Period of Military Service through the Defense Manpower Data Center (DMDC), made on or after January 1, 2015, that: i. remains pending;
ii. was not decided within 30 days of the date of the request; or iii. was denied before May 4, 2021. gg.
“Servicemembers Civil Relief Act Benefits” or “SCRA Benefits” means the 6% interest rate cap benefit available to Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 14 of 60
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servicemembers during the Period of Military Service pursuant to the Servicemembers Civil Relief Act, 50 U.S.C. § 3937(a)(1)(B), or under the Servicing Guidelines, the April 19, 2021 letter to Defendant PHEAA from the Administrator, or Defendant PHEAA’s NCSLT Loan servicing policies, procedures, staff guidance, or alerts. hh. “Servicing Guidelines” means the Servicing Guidelines for TERI Loan Programs Serviced at Pennsylvania Higher Education Assistance Agency (d/b/a American Education Services), attached as Exhibit B to the September 28, 2006 Amended and Restated Private Student Loan Servicing Agreement Between Pennsylvania Higher Education Assistance Agency and The First Marblehead Corporation, and all subsequent amendments thereto, including but not limited to letter-amendments which the Defendants commonly refer to as “Read and Agreed” letters. ii. “Special Subservicer” means the entity that manages and oversees debt collection activities for charged-off NCSLT Loans, on behalf of each respective Trust. Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 15 of 60
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jj. “Student Borrower” means the obligor on an NCSLT Loan for whose educational expenses the loan was made. CONDUCT PROVISIONS I.
Prohibited Conduct IT IS ORDERED, under §§ 1053 and 1055 of the CFPA, that: 6.
NCSLT Defendants, whether acting directly or indirectly, may not violate sections 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531 and 5536, with respect to Elevated Borrower Requests. II.
Affirmative Requirements IT IS ORDERED, under §§ 1053 and 1055 of the CFPA, that: 7.
NCSLT Defendants and Defendant PHEAA have amended the Servicing Guidelines, as of May 1, 2024 and effective June 30, 2024 to ensure that the servicing of NCSLT Loans complies with the terms of this Order. The Servicing Guidelines, as amended, provide: a. instructions related to the review and decision of certain Borrower Requests;
b. a process through which Defendant PHEAA may escalate certain Elevated Borrower Requests for decision, which Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 16 of 60
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decision may then be communicated by an NCSLT-related Entity (including following consultation with other NCSLTrelated Entities and/or the Note Insurer, as applicable) or, with respect to Elevated Borrower Requests for Co-signer Release only, the Special Subservicer; and c. specific timeframes and deadlines for implementation of the steps described above and in compliance with paragraph 10 of this Order.
8.
Defendants must implement and adhere to the steps, deadlines, and timeframes outlined in the Servicing Guidelines with respect to Elevated Borrower Requests.
9.
Defendants may not implement modifications to the Servicing Guidelines with respect to Elevated Borrower Requests without 30 days prior notification to the Enforcement Director if such modifications result in reduced protection to borrowers. The Enforcement Director will have the discretion to make a determination of non-objection to the proposed modifications to the Servicing Guidelines with respect to Elevated Borrower Requests or direct Defendants to revise it. If the Enforcement Director directs Defendants to revise the proposed modifications to the Servicing Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 17 of 60
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Guidelines, Defendants must revise and resubmit the proposed modifications to the Servicing Guidelines within 30 days. 10.
NCSLT Defendants, whether acting directly or indirectly through one or more NCSLT-related Entities, and in connection with any Borrower Request made after the effective date of the amendment to the Servicing Guidelines described in paragraph 7, must require and take all reasonable steps to ensure that:
a. Elevated Borrower Requests, except those for Co-signer Release, are reviewed and a decision communicated to Defendant PHEAA within 30 calendar days of the receipt of any such Elevated Borrower Request, or any necessary supplemental documentation related to any such Elevated Borrower Request from PHEAA, whichever is later, by the NCSLT-related Entity designated in the Servicing Guidelines as amended, provided, however, the NCSLT Defendants, through the NCSLT-related Entity designated in the Servicing Guidelines as amended, may extend the time period for a reasonable period for good cause if it communicates to Defendant PHEAA, who specifically Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 18 of 60
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informs the borrower that more time is required to decide their request, within the 30 calendar-day period; and b. Elevated Borrower Requests for Co-signer Release are reviewed and a decision communicated to Defendant PHEAA within 25 business days of the Special Subservicer’s, or any NCSLT-related Entity designated in any subsequent amendment to the Servicing Guidelines’, receipt of any such Elevated Borrower Request for Co-Signer Release. 11.
If there is any inconsistency between the amendment to the Servicing Guidelines described in paragraph 7, and paragraph 10 of this Order, the amendment to the Servicing Guidelines described in paragraph 7 shall control the processes for Elevated Borrower Requests. 12.
Within 60 days of the Effective Date, NCSLT Defendants shall require:
a. the NCSLT-related Entities to review any of their own relevant policies and procedures relating to Elevated Borrower Requests, except those for Co-signer Release, and modify or implement new policies, procedures, or protocols to carry out the requirements of paragraph 10 of this Order, Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 19 of 60
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including a timetable for training of employees or agents; and b. the NCSLT-related Entities and Special Subservicer to review any of their own relevant policies and procedures relating to Elevated Borrower Requests for Co-signer Release, and modify or implement new policies, procedures, or protocols to carry out the requirements of paragraph 10 of this Order, including a timetable for training of employees or agents. III.
Compliance Plan for NCSLT Defendants IT IS FURTHER ORDERED that:
13.
The NCSLT Defendants shall submit to the Enforcement Director the policies and procedures described in paragraph 12 within 60 days of the Effective Date for a determination of non-objection. 14.
The Enforcement Director will have the discretion to make a determination of non-objection to the policies and procedures submitted under paragraph 13 or direct that revisions to one or more such policies and procedures are necessary to conform with the obligations of the amendment to the Servicing Guidelines described in paragraph 7 and paragraph 10 of this Order. If the Enforcement Director directs that any Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 20 of 60
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such revisions are necessary, NCSLT Defendants must require the NCSLTrelated Entities or the Special Subservicer, as applicable, to revise the policies and procedures and re-submit the revised policies and procedures to the Enforcement Director within 30 days. 15.
After receiving notification that the Enforcement Director has made a determination of non-objection to the policies and procedures submitted under paragraphs 13 and 14, NCSLT Defendants shall so inform the NCSLT-related Entities or the Special Subservicer with respect to compliance with such policies and procedures, as applicable. MONETARY PROVISIONS IV.
Order to Pay Redress IT IS FURTHER ORDERED that:
16.
For each of the Monthly Pay NCSLT Defendants, no later than the second Distribution Date after the month in which the Effective Date occurs for such NCSLT Defendant, and for each of the Quarterly Pay NCSLT Defendants, no later than the first Distribution Date after the month in which the Effective Date occurs for such NCSLT Defendant, and for Defendant PHEAA, within 30 days of the Effective Date, Defendants must reserve, in the aggregate, an earmarked amount not less than Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 21 of 60
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$2,886,817 for the purpose of providing redress to Affected Consumers as required by this Section. NCSLT Defendants shall be deemed to have complied with this paragraph by reserving an amount equal to the collective NCSLT Defendants’ estimated portion of responsibility for the redress payments described in Section IV of this Order, according to a cost allocation agreement between the NCSLT Defendants and Defendant PHEAA. The amount owed by each NCSLT Defendant is subject to adjustment among the NCSLT Defendants. Any time limits for performance under this paragraph may be extended by mutual written agreement of the parties with notice to the Court of any such agreement. Other modifications may be made only upon approval of the Court, by motion of any party. In the event that additional consumer redress is required to be paid under the terms of this Order, such additional consumer redress amounts shall be paid exclusively by Defendant PHEAA and not any of the NCSLT Defendants. NCSLT Defendants shall be required to transmit to Defendant PHEAA their portion of the redress payments, according to the cost allocation agreement between the NCSLT Defendants and Defendant PHEAA, on or before the 45th day following the Enforcement Director’s non-objection to the Final Redress Plan.
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17.
Defendants must, in accordance with the provisions of the Redress Plans described in paragraphs 18-21: a. pay $200 in redress to all Delayed Response Affected Consumers; and b. pay and provide redress to all Affected Consumers consistent with the terms identified in the Review of Affected Requests, paragraphs 28-43.
18.
Within 30 days of the Effective Date, Defendants jointly must submit to the Enforcement Director for review and non-objection a comprehensive written plan for assessing the scope of redress consistent with this Order (Initial Redress Plan). The Enforcement Director will have the discretion to make a determination of non-objection to the Initial Redress Plan or direct Defendants to revise it. If the Enforcement Director directs Defendants to revise the Initial Redress Plan, Defendants must revise and resubmit the Initial Redress Plan to the Enforcement Director within 15 days. After receiving notification that the Enforcement Director has made a determination of non-objection to the Initial Redress Plan, Defendants must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Initial Redress Plan. 19.
The Initial Redress Plan must:
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a. establish a Redress Committee for coordination and oversight of the implementation of the redress required by Section IV of this Order. The Redress Committee shall: i. include representatives of the NCSLT Defendants, one or more of the NCSLT-related Entities, the Special Subservicer, Defendant PHEAA, and such other entities as have significant roles in executing the Redress Plans;
ii. facilitate actions necessary for NCSLT Defendants, NCSLT-related Entities, the Special Subservicer, Defendant PHEAA, or other service providers to carry out the Redress Plans in a timely and satisfactory manner;
iii. facilitate timely reporting by entities involved in evaluating, implementing, and effectuating borrower redress under the Redress Plans on the status of redress obligations; and iv. provide for review of plans and reports related to evaluating, implementing, and effectuating borrower redress, and submissions to the Bureau, Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 24 of 60
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including the NCSLT Redress Report described in paragraph 27;
b. identify, and describe the methodology for identifying, the proposed population of Exception Requests, Affected Consumers, and Affected Requests;
c. describe Defendants’ methodology to be used to complete the Review of Affected Requests and determine the amount of redress that Defendants will provide to each Affected Consumer to comply with paragraph 17; and d. present a timeline for completion.
20.
Within 30 days of the completion of the Review of Affected Requests described in paragraphs 28-43, Defendants jointly must submit to the Enforcement Director for review and non-objection a comprehensive written plan for providing redress consistent with this Order (“Final Redress Plan,” and, together with the Initial Redress Plan, the “Redress Plans”). The Enforcement Director will have the discretion to make a determination of non-objection to the Final Redress Plan or direct Defendants to revise it. If the Enforcement Director directs Defendants to revise the Final Redress Plan, Defendants must revise and resubmit the Final Redress Plan to the Enforcement Director within 15 days. After Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 25 of 60
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receiving notification that the Enforcement Director has made a determination of non-objection to the Final Redress Plan, Defendants must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Final Redress Plan. 21.
The Final Redress Plan must:
a. include a final list of all Affected Consumers and the amount of redress that Defendants will provide to each Affected Consumer to comply with paragraph 17; b. specify how Defendants will comply with each provision of paragraphs 28-43;
c. include the form of the letter and envelope or electronic communication (Redress Notice), as applicable, to be sent notifying Affected Consumers who are entitled to redress of their right to redress; the Redress Notice must include a statement that the payment is made in accordance with the terms of this Order, including that there is not an issuance of a 1099, as referenced in paragraph 28, and the factual basis for that non-issuance; Defendants must not include in any envelope containing a Redress Notice any materials other than the approved Redress Notice and redress checks, unless Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 26 of 60
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Defendants have written confirmation from the Enforcement Director that the Bureau does not object to the inclusion of such additional materials;
d. describe the process for providing redress to Affected Consumers, and must include the following requirements: i.
for any Affected Consumer that does not have an NCSLT Loan serviced by PHEAA at the time of the redress payment, Defendants must send each Affected Consumer, or their authorized representative, a redress check (Redress Check) in the amount of the refund required by paragraph 17;
ii.
Defendants must send Redress Checks by United States Postal Service first-class mail, address correction service requested;
iii.
prior to sending Redress Notices and Redress Checks, Defendants must make reasonable attempts to obtain a current address for each Affected Consumer that does not have an NCSLT Loan serviced by PHEAA at the time of the redress payment, by using, at a minimum, the National Change of Address System (NCAS), any Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 27 of 60
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NCSLT-specific databases maintained by the Special Subservicer or any NCSLT-related Entity, or their agents or affiliates, and skip-tracing. If no updated address is obtained through such methods, Defendants may mail the Redress Notice and the Redress Check to the consumer’s last known mailing address; iv.
if a Redress Check or Redress Notice is returned to Defendants as undeliverable, Defendants must make additional reasonable attempts to contact the Affected Consumer and obtain a current address using a commercially available database other than the NCAS or by obtaining from any NCSLT-specific database of the Special Subservicer or any NCSLT-related Entity, or their agents or affiliates, the Affected Consumer’s last known email address or phone number and contacting the last known email address or phone number. Defendants must promptly remail each returned Redress Check and Redress Notice to each Affected Consumer’s current address, if any, obtained through such reasonable attempts; and Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 28 of 60
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v.
if a Redress Check that Defendants have attempted to send to an Affected Consumer is returned to Defendants, Defendants must retain the redress amount of such Affected Consumer for a period of one hundred and eighty (180) days from the date the check was mailed or re-mailed, whichever is later, during which period such amount may be claimed by such Affected Consumer;
e. set forth all procedures, deadlines, and timeframes for completing each step of the Final Redress Plan, consistent with the terms of this Order;
f. identify the entities with respect to the NCSLT Defendants and identify the officers, agents, servants, employees, and attorneys with respect to Defendant PHEAA responsible for executing administration of the Final Redress Plan; g. provide that nothing in the Final Redress Plan creates any new collection, credit reporting, or litigation rights on behalf of Defendants;
h. provide that Defendants will pay all costs of administering redress as required by this Section; and Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 29 of 60
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i. identify an independent third-party auditor (Auditor) to produce a Redress Report at the completion of the Final Redress Plan. The Auditor’s expenses shall be paid for by Defendants.
22.
Defendants must mail all Redress Checks and Redress Notices within 60 days after the Enforcement Director has made a determination of non-objection to the Final Redress Plan. 23.
Within 30 days of completing the Final Redress Plan, Defendants must ensure that the Auditor submits its Redress Report to the Enforcement Director detailing:
a. the consumers and consumer accounts who received redress; b. the total amount of redress paid to those consumers; c. the form of redress received by each consumer; d. any remainder of funds to be wired to the Bureau pursuant to paragraph 24; and e. the work conducted by the Auditor to validate the accuracy of the Redress Report.
24.
Within 30 days of completing the Final Redress Plan, if the amount of redress provided to Affected Consumers is less than $2,886,817, Defendants must pay to the Bureau, by wire transfer to the Bureau or to the Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 30 of 60
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Bureau’s agent, and according to the Bureau’s wiring instructions, the difference between the amount of redress provided to Affected Consumers and $2,886,817. Unclaimed payments to Affected Consumers shall be considered escheated property and handled pursuant to applicable state unclaimed property laws.
25.
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 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. 26.
Defendants may not condition the payment of any redress to any Affected Consumer under this Order on any consumer waiving any right.
27.
One year after the Effective Date, the NCSLT Defendants must submit to the Enforcement Director an accurate written redress progress report (NCSLT Redress Report), which, at a minimum: a. Describes the steps that the NCSLT Defendants and the Redress Committee have taken to reasonably assess whether Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 31 of 60
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the NCSLT Defendants are complying with the Final Redress Plan;
b. describes in detail whether and how the NCSLT Defendants have complied with the Final Redress Plan, which may be based on reliance on the Auditor’s Redress Report, and any corrective actions taken to remedy potential non-compliance with the applicable requirement, paragraph, or subparagraph; and c. attaches a copy of each Order Acknowledgment obtained under Section VIII, unless previously submitted to the Bureau.
Review of Affected Requests 28.
Defendants, or their duly authorized agents or representatives, must conduct a review of all Affected Requests and provide redress in accordance with the provisions described in paragraphs 28-43. Defendants must ensure that none of the relief is structured in a manner that necessitates issuing a Form 1099 to an Affected Consumer. Accordingly, NCSLT Defendants shall ensure that neither NCSLT Defendants, nor any NCSLT-related Entity, nor the Special Subservicer will issue a Form 1099-C or otherwise report cancellation of debt income with respect to Affected Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 32 of 60
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Consumers, and Defendant PHEAA will not issue a Form 1099-C or otherwise report cancellation of debt income with respect to Affected Consumers.
Requests for Co-Signer Release 29.
For Requests for Co-signer Release on NCSLT Loans that are either performing or that have been charged-off as of the Effective Date, and were eligible for Co-signer Release as of the date of the request, pursuant to the Servicing Guidelines and any other applicable lender criteria as of January 2015, Defendants must: a. grant the requested Co-signer Release, effective as of the date of the request;
b. for the Co-signer, request addition of the “T” code in the ECOA field associated with the NCSLT Loans, and update credit reporting to identify and correct any fields where Negative Information was reported after the date of the request, including but not limited to payment history profile, payment rating, and Date of First Delinquency, to all Consumer Reporting Agencies (CRAs) to which the information was furnished;
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c. satisfy, release, or move to vacate any judgments obtained against a Co-signer after the date of the request, with no charges or cost to the Affected Consumers, cease any postjudgment enforcement activities as to the Co-signer, and remove, withdraw, or terminate any active wage garnishments, bank levies, or other means of enforcing a judgment as to the Co-signer;
d. provide documentation of satisfaction, release, or vacatur to all CRAs to which the information was furnished, and to the Affected Consumers;
e. cease any debt collection efforts against the Co-signer and dismiss with prejudice any pending collections lawsuits against the Co-signer;
f. reimburse to the Co-signer any payments that can be identified as from the Co-signer made after the date of the request with no impact to the Student Borrower’s remaining balance;
g. for charged-off loans, reimburse to the Co-signer any late fees, attorney’s fees, court fees, or other fees that can be identified as paid by the Co-signer after the date of the Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 34 of 60
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request with no impact to the Student Borrower’s remaining balance, and for performing loans, waive any late fees or other fees assessed after the date of the request, and ensure any reimbursements of fees paid are applied with the Date Transaction Effective as the date that the fee was originally assessed; and h. ensure the above provisions do not result in a change to the last payment date or Date of First Delinquency for the Student Borrower recorded in Defendant PHEAA’s, any NCSLT-related Entity’s, any NCSLT Defendants’ service providers’, or the Special Subservicer’s systems, and ensure any post-judgment collections that are credited to the account do not result in a change to the last payment date or Date of First Delinquency.
30.
For Requests for Co-signer Release on NCSLT Loans that have been paid in full as of the Effective Date, and were eligible for Co-signer Release as of the date of the request, pursuant to the Servicing Guidelines and any other applicable lender criteria as of January 2015, Defendants must:
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a. for the Co-signer, request addition of the “T” code in the ECOA field associated with the NCSLT Loans, and update credit reporting to identify and correct any fields where Negative Information was reported after the date of the request, including but not limited to payment history profile, payment rating, and Date of First Delinquency; b. reimburse to the Co-signer any late fees, attorney’s fees, court fees, or other fees assessed against the Co-signer after the date of the request with no impact to the Student Borrower’s remaining balance; and c. reimburse to the Co-signer any payments that can be identified as from the Co-signer made after the date of the request with no impact to the Student Borrower’s remaining balance.
31.
For Requests for Co-signer Release on NCSLT Loans that would have been denied for failure to supply all necessary documents, Defendants must treat the request as eligible for Co-signer Release as of the date of the request, and remediation shall be consistent with the provisions of paragraphs 29-30, as applicable.
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32.
For Requests for Co-signer Release on NCSLT Loans that were not eligible for Co-signer Release as of the date of the request, pursuant to the Servicing Guidelines and any other applicable lender criteria as of January 2015, Defendants must provide a denial notice, and include a description of the reason why the request was denied, and any required criteria for approval.
Requests for Servicemembers Civil Relief Act (SCRA) Benefits 33.
For Requests for SCRA Benefits on NCSLT Loans that are performing as of the Effective Date, and were eligible for SCRA Benefits as of the date of the request, Defendants must: a. to the extent not already completed, retroactively apply a 6% interest rate cap during the Student Borrower or Co-signer’s Period of Military Service and reimburse any overpayments to the Student Borrower;
b. submit corrections to all CRAs to whom Defendants furnished to correct all fields that were furnished incorrectly as a result of incorrectly determining the payment amount or any delinquency based on an application to the account of an interest rate greater than a 6% interest rate; Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 37 of 60
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c. if the Date of First Delinquency is more than seven years before the Effective Date, cease furnishing on the tradeline; d. waive any late fees or other fees assessed after the date of the request, and ensure any reimbursement of fees paid are applied with the Date Transaction Effective as the date that the fee was originally assessed; and e. ensure the above provisions do not result in a change to the last payment date or Date of First Delinquency recorded in Defendant PHEAA’s, any NCSLT-related Entity’s, any NCSLT Defendants’ service providers’, or the Special Subservicer’s systems.
34.
For Requests for SCRA Benefits on NCSLT Loans that have been charged-off as of the Effective Date, were eligible for SCRA Benefits as of the date of the request, and had an interest rate above 6% at any time during the Student Borrower or Co-signer’s Period of Military Service, Defendants must:
a. to the extent not already completed, retroactively apply a 6% interest rate cap during the Student Borrower or Co-signer’s Period of Military Service and reimburse any overpayments to the Student Borrower;
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b. submit corrections to all CRAs to whom Defendants furnished to correct all fields that were furnished incorrectly as a result of incorrectly determining the payment amount or any delinquency based on an application to the account of an interest rate greater than a 6% interest rate; c. if the Date of First Delinquency is more than seven years before the Effective Date, cease furnishing on the tradeline; d. if the Date of First Delinquency is before the date on which the 6% interest rate cap was retroactively applied, satisfy, release, or move to vacate any judgments obtained since the date of request, with no charges or cost to the Affected Consumers, and cease any post-judgment enforcement activities, and remove, withdraw, or terminate any active wage garnishments, bank levies, or other means of enforcing a judgment;
e. provide documentation of satisfaction, release, or vacatur to all CRAs to which the information was furnished and to the Affected Consumers;
f. if the Date of First Delinquency is before the date on which the 6% interest rate cap was retroactively applied, cease any Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 39 of 60
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debt collection efforts and dismiss any pending collections lawsuits with prejudice;
g. reimburse to the Student Borrower any late fees, attorney’s fees, court fees, and other fees paid since the date of the request;
h. if the Date of First Delinquency is before the date on which the 6% interest rate cap was retroactively applied, must not file a lawsuit to collect the NCSLT Loan or file proofs of claims in bankruptcy courts, and must prohibit any service provider from filing a lawsuit to collect the NCSLT Loan or filing proofs of claims in bankruptcy courts; and i. if the Date of First Delinquency is before the date on which the 6% interest rate cap was retroactively applied, must condition any future sale of the NCSLT Loan on the purchaser agreeing to a prohibition against filing a lawsuit to collect the debt or filing proofs of claims in bankruptcy courts.
35.
For Requests for SCRA Benefits on NCSLT Loans that have been paid in full as of the Effective Date, and were eligible for SCRA Benefits as of the date of the request, Defendants must: Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 40 of 60
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a. to the extent not already completed, retroactively apply a 6% interest rate cap during the Student Borrower or Co-signer’s Period of Military Service, and reimburse any overpayments to the Student Borrower;
b. submit corrections to all CRAs to whom Defendants furnished to correct all fields that were furnished incorrectly as a result of incorrectly determining the payment amount or any delinquency based on an application to the account of an interest rate greater than a 6% interest rate; and c. reimburse any late fees, attorney’s fees, court fees, and other fees paid since the date of the request. 36.
For Requests for SCRA Benefits on NCSLT Loans that were not eligible for SCRA Benefits as of the date of the request, Defendants must provide a denial notice, and include a description of the reason why the request was denied, and any required criteria for approval. Requests for COVID-related Natural Disaster Forbearance 37.
For any Request for COVID-related Natural Disaster Forbearance on NCSLT Loans, Defendants must: a. for loans that are performing or paid in full as of the Effective Date, and have any Negative Information reported Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 41 of 60
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within three months after the date of the request, update credit reporting to all CRAs to which the information was furnished to identify and correct any fields where Negative Information was reported, including but not limited to payment history profile, payment rating, and Date of First Delinquency, and furnish the tradeline as though a forbearance had been applied, including any administrative forbearance that could have been used to bring the loan current before the date of the request; b. pay an additional $150 in redress to any Affected Consumers that made a payment between the date of the request and any COVID-related Natural Disaster Forbearance approval within three months after the date of the request, with no impact to the Affected Consumers’ remaining balance; c. for loans that have been paid in full or charged-off as of the Effective Date, reimburse to the Student Borrower any late fees, attorney’s fees, court fees, or other fees paid within three months after the date of the request; d. for performing loans as of the Effective Date, waive any late fees, attorney’s fees, court fees, and other fees assessed Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 42 of 60
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within three months after the date of the request, and ensure any reimbursement of fees paid are applied with the Date Transaction Effective as the date that the fee was originally assessed; and e. ensure the above provisions do not result in a change to the last payment date or, for charged-off loans only, the Date of First Delinquency, recorded in Defendant PHEAA’s, any NCSLT-related Entity’s, any NCSLT Defendants’ service providers’, or the Special Subservicer’s systems. Requests for Extension of COVID-related Payment Relief 38.
For Requests for Extension of COVID-related Payment Relief on NCSLT Loans that are performing as of the Effective Date, Defendants must:
a. for loans that have any Negative Information reported within 12 months after the date of the request, update credit reporting to all CRAs to which the information was furnished to identify and correct any fields where Negative Information was reported, including but not limited to payment history profile, payment rating, and Date of First Delinquency, and furnish the tradeline as though a forbearance had been Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 43 of 60
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applied, including any administrative forbearance that could have been used to bring the loan current before the date of the request;
b. waive any late fees or other fees assessed within 12 months after the date of the request, and ensure any reimbursement of fees paid are applied with the Date Transaction Effective as the date that the fee was originally assessed; c. ensure the above provisions do not result in a change to the last payment date recorded in Defendant PHEAA’s, any NCSLT-related Entity’s, any NCSLT Defendants’ service providers’, or the Special Subservicer’s systems; and d. ensure the above provisions do not result in a change to the remaining payment relief options available to the Affected Consumers.
39.
For Requests for Extension of COVID-related Payment Relief on NCSLT Loans that have been charged-off as of the Effective Date, Defendants must:
a. if the Date of First Delinquency is more than seven years before the Effective Date, cease furnishing on the tradeline; Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 44 of 60
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b. reimburse to the Student Borrower any late fees, attorney’s fees, court fees, and other fees paid within 12 months after the date of the request; and c. ensure the above provisions do not result in a change to the last payment date recorded or Date of First Delinquency in Defendant PHEAA’s, any NCSLT-related Entity’s, any NCSLT Defendants’ service providers’, or the Special Subservicer’s systems.
40.
For Requests for Extension of COVID-related Payment Relief on NCSLT Loans that have been paid in full as of the Effective Date, Defendants must:
a. for loans that have any Negative Information reported within 12 months after the date of the request, update credit reporting to all CRAs to which the information was furnished to identify and correct any fields where Negative Information was reported, including but not limited to payment history profile, payment rating, and Date of First Delinquency, and furnish the tradeline as though a forbearance had been applied, including any administrative forbearance that could Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 45 of 60
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have been used to bring the loan current before the date of the request; and b. reimburse to the Student Borrower any late fees, attorney’s fees, and any other fees paid within 12 months after the date of the request.
Requests for Miscellaneous Exception 41.
For Requests for Miscellaneous Exception with an Exception Type that references deferment, forbearance, reduced payment, repayment, lower payment, lower repayment, or additional options, Defendants must provide redress as if the request was a Request for Extension of COVIDrelated Payment Relief, and remediation shall be consistent with the provisions of paragraphs 38-40, as applicable. 42.
For Requests for Miscellaneous Exception with an Exception Type that references Natural Disaster Forbearance, Defendants must provide redress as if the request was a Request for COVID-related Natural Disaster Forbearance, and remediation shall be consistent with the provisions of paragraph 37.
43.
For Requests for Miscellaneous Exception with an Exception Type not described in paragraphs 41-42, Defendants must assess what the response to the Exception Request would have been on the date of the Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 46 of 60
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request, pursuant to the applicable Servicing Guidelines and any other applicable lender criteria as of January 2015, and, if the Exception Request would have been granted, propose in the Final Redress Plan for each such Exception Type specific remediation based on the nature of the request and the payment status of the NCSLT Loan. The categorization and treatment of each Request for Miscellaneous Exception with an Exception Type not described above shall be detailed in the Redress Plans, subject to nonobjection by the Enforcement Director pursuant to paragraphs 18-21. V.
Order to Pay Civil Money Penalty IT IS FURTHER ORDERED that:
44.
Under § 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint, NCSLT Defendants, collectively, must pay a civil money penalty of $400,000 to the Bureau, as they shall determine proportionate to the estimated number of Exception Requests involving each such NCSLT as of the Effective Date. Within 60 days of the Effective Date, NCSLT Defendants shall provide the proportionate determination for their individual penalty payments to the Enforcement Director.
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45.
Within 60 days of the Effective Date, the Monthly Pay NCSLT Defendants must pay their proportion of half of the civil money penalty by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions. Within 90 days of the Effective Date, the Monthly Pay NCSLT Defendants must pay their proportion of the remaining one half of the civil money penalty by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions.
46.
Within 120 days of the Effective Date, the Quarterly Pay NCSLT Defendants must pay their proportion of half of the civil money penalty 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 NCSLT Defendants must pay their proportion of the remaining one half of the civil money penalty by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions.
47.
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).
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48.
NCSLT 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, NCSLT 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. 49.
To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, NCSLT Defendants may not argue that they are entitled to, nor may NCSLT 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. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against NCSLT Defendants based on the civil money penalty paid in this action or based on Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 49 of 60
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any payment that the Bureau makes from the Civil Penalty Fund, NCSLT Defendants must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau, and pay the amount of the offset or reduction 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.
VI.
Additional Monetary Provisions IT IS FURTHER ORDERED that:
50.
In the event of any default on NCSLT 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.
51.
NCSLT Defendants 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 NCSLT Defendants. 52.
NCSLT Defendants acknowledge that their Taxpayer Identification Numbers (Social Security Number or Employer Identification Number), which NCSLT Defendants previously submitted to the Bureau, Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 50 of 60
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may be used for collecting and reporting on any delinquent amount arising out of this Order, in accordance with 31 U.S.C. § 7701. 53.
Within 30 days of the entry of a final judgment, order, or settlement in a Related Consumer Action, NCSLT Defendants must notify the Enforcement Director of the final judgment, order, or settlement in writing. That notification must indicate the amount of redress, if any, that NCSLT Defendants paid or are required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid.
COMPLIANCE PROVISIONS VII.
Reporting Requirements IT IS FURTHER ORDERED that:
54.
For 5 years after the Effective Date, NCSLT 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 Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 51 of 60
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against NCSLT Defendants; or a change in NCSLT Defendants’ names or addresses. NCSLT Defendants 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.
55.
Within 7 days of the Effective Date, each NCSLT Defendant, directly or indirectly through an NCSLT-related Entity, must: a. 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 NCSLT Defendant; and b. designate at least one telephone number and email, physical, and postal addresses as points of contact for consumers with inquiries related to consumer relief under the Order. 56.
NCSLT Defendants must report any change in the information required to be submitted under paragraph 55 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner.
VIII.
Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:
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57.
Within 7 days of the Effective Date, NCSLT Defendants must submit to the Enforcement Director an acknowledgment of receipt of this Order, sworn under penalty of perjury.
58.
Within 30 days of the Effective Date, the NCSLT Defendants must deliver a copy of this Order to each NCSLT-related Entity, the Special Subservicer, and any service providers, agents, or other representatives who may have responsibilities related to the subject matter of this Order. 59.
For 5 years from the Effective Date, NCSLT Defendants must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section VII, any future board members and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who will have responsibilities related to the subject matter of this Order before they assume their responsibilities.
60.
NCSLT 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 all persons receiving a copy of this Order under this Section.
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61.
Ninety (90) days from the Effective Date, NCSLT Defendants must submit to the Bureau a list of all persons and their titles to whom this Order was delivered through that date under this Section and a copy of all signed and dated statements acknowledging receipt of this Order under paragraph 60.
IX.
Recordkeeping IT IS FURTHER ORDERED that:
62.
For a period of five (5) years following the Effective Date, the NCSLT Defendants must retain, or must require a service provider to maintain, the following business records: a. all documents and records received and in the possession and control of the NCSLT Defendants supporting the NCSLT Defendants’ full compliance with the Redress Plan, Redress Report, and each provision of this Order, including all submissions to the Bureau;
b. all documents and records received and in the possession and control of the NCSLT Defendants pertaining to the Redress Plan, described in Section IV above; c. copies of all customer service scripts, training materials, Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 54 of 60
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websites, and communication templates presented to consumers with NCSLT Loans;
d. copies of documents related to Elevated Borrower Requests sufficient to show the request, the underlying documentation, and the handling of the response by the NCSLT Defendants or any NCSLT-related Entity or the Special Subservicer (only with respect to Elevated Borrower Requests for Co-signer Release);
e. all consumer complaints with respect to Elevated Borrower Requests received by the NCSLT Defendants, NCSLT-related Entities (whether received directly or forwarded from a third party), or the Special Subservicer (only with respect to Elevated Borrower Requests for Co-signer Release) and any responses to those complaints; and f. records showing, for each service provider providing student loan servicing services related to NCSLT Loans, the name of a point of contact, and that person’s telephone number, email, physical, and postal address, job title or position, dates of service, and, if applicable, the reason for termination.
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63.
NCSLT Defendants must make the documents identified in paragraph 62 available to the Bureau upon the Bureau’s request, or request that the relevant service provider do so. X.
Notices IT IS FURTHER ORDERED that:
64.
Unless otherwise directed in writing by the Bureau, NCSLT Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. The National Collegiate Master Student Loan Trust I, et al., Case No. [Docket #],” and send them by email to [email protected]:
ATTN: Enforcement Director Consumer Financial Protection Bureau Office of Enforcement XI.
Cooperation with the Bureau IT IS FURTHER ORDERED that:
65.
NCSLT Defendants must cooperate fully to help the Bureau determine the identity and location of, and the amount of injury sustained Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 56 of 60
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by, each Affected Consumer. NCSLT Defendants must provide such information in its or its agents’ possession or control within 14 days of receiving a written request from the Bureau. 66.
NCSLT Defendants must remain registered for the Bureau’s Company Portal and in connection with responding to consumer complaints and inquiries must comply with the requirements of §§ 1034(b) and (c) of the CFPA, 12 U.S.C. §§ 5534(b) and (c). 67.
Unless otherwise prohibited by law or regulation, NCSLT Defendants must identify in its Redress Notice to Affected Consumers, described in paragraph 21(c), that they can file a complaint with the Bureau and provide the applicable telephone, website, and mailing information to do so.
XII.
Compliance Monitoring IT IS FURTHER ORDERED that:
68. Within 14 days of receipt of a written request from the Bureau, NCSLT Defendants must submit additional compliance reports or other requested information available to them, which must be sworn under penalty of perjury; provide sworn testimony; or produce documents. Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 57 of 60
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69.
For purposes of this Section, the Bureau may communicate directly with NCSLT Defendants or their designee, unless NCSLT Defendants retain counsel related to these communications. 70.
NCSLT Defendants must permit Bureau representatives to interview any person affiliated with NCSLT Defendants, any NCSLT-related Entity, any NCSLT service provider, or the Special Subservicer who has agreed to such an interview regarding: (a) this matter, (b) anything related to or associated with the conduct described in the Complaint, or (c) compliance with this Order. The person interviewed may have counsel present.
71.
Nothing in this Order will limit the Bureau’s lawful use of compulsory process under 12 C.F.R. § 1080.6. XIII.
Transfer or Assignment of Operations 72.
Should NCSLT Defendants seek to transfer or assign all or part of their operations that are subject to this Order, including the transfer of student loan servicing rights, NCSLT 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.
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XIV.
Release 73.
The Bureau releases and discharges NCSLT Defendants from all potential liability for law violations that the Bureau has or might have asserted based on the allegations of the Complaint, to the extent such conduct occurred before the Effective Date and the Bureau knows about such conduct as of the Effective Date. The Bureau may use the practices described in the Complaint in future enforcement actions against NCSLT Defendants and its 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 this Order, or to seek penalties for any violations of this Order.
XV.
Retention of Jurisdiction IT IS FURTHER ORDERED that:
74.
The Court will retain jurisdiction of this matter for the purpose of enforcing this Order.
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XVI.
Service 75.
This Order may be served upon the NCSLT Defendants by electronic mail, certified mail, or United Parcel Service, either by the United States Marshal, the Clerk of the Court, or any representative or agent of the Bureau.
IT IS SO ORDERED.
DATED this 1st day of October, 2024.
_________________________________ United States District Court s/ Jennifer P. Wilson Case 1:24-cv-00756-JPW Document 50 Filed 10/01/24 Page 60 of 60
Stipulation ()
PDF of this document (64 pages)
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UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
CONSUMER FINANCIAL PROTECTION BUREAU,
Plaintiff,
v.
PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY, THE NATIONAL COLLEGIATE MASTER STUDENT LOAN TRUST I, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2003-1, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2004-1, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2004-2, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-1, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-2, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2005-3, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006- 1, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-2, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006- 3, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-4, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007- 1, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-2, THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007- 3, and THE NATIONAL COLLEGIATE STUDENT LOAN TRUST 2007-4,
Defendants.
Case No.
1:24-cv-00756-JPW
STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY
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The Consumer Financial Protection Bureau (“Bureau”) commenced this civil action on May 6, 2024 to obtain injunctive and monetary relief and civil penalties from The National Collegiate Master Student Loan Trust I, The National Collegiate Student Loan Trust 2003-1, The National Collegiate Student Loan Trust 2004-1, The National Collegiate Student Loan Trust 2004-2, The National Collegiate Student Loan Trust 2005-1, The National Collegiate Student Loan Trust 2005-2, The National Collegiate Student Loan Trust 2005-3, The National Collegiate Student Loan Trust 2006-1, The National Collegiate Student Loan Trust 2006-2, The National Collegiate Student Loan Trust 2006-3, The National Collegiate Student Loan Trust 2006-4, The National Collegiate Student Loan Trust 2007-1, The National Collegiate Student Loan Trust 2007-2, The National Collegiate Student Loan Trust 2007-3, The National Collegiate Student Loan Trust 2007-4 (collectively “NCSLTs” or “the Trusts”), and Pennsylvania Higher Education Assistance Agency (“PHEAA”), also doing business as American Education Services (“AES”). The Complaint alleges 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 owned by the Trusts.
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The Bureau and Defendant PHEAA agree to entry of this Stipulated Final Judgment and Order (“Order”), without adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint.
The Bureau and NCSLT Defendants have agreed to simultaneous entry of a separate Stipulated Final Judgment and Order (“NCSLT Defendants Order”). The requirements of Section V (Order to Pay Redress) of this Order and the requirements of Section IV (Order to Pay Redress) of the NCSLT Defendants Order together represent the complete terms for liability for consumer redress and should not be interpreted as duplicative requirements.
FINDINGS 1.
This Court has personal jurisdiction over the parties and jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1331 and 28 U.S.C. § 1345.
2.
Defendant PHEAA neither admits nor denies the allegations in the Complaint, except as specified in this Order. For purposes of this Order, Defendant PHEAA admits the facts necessary to establish the Court’s jurisdiction over it and the subject matter of this action. Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 3 of 64
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3.
Defendant PHEAA waives all rights to seek judicial review or otherwise challenge or contest the validity of this Order and 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 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 Consumer” means any Student Borrower or Cosigner for an NCSLT Loan that submitted an Affected Request and any Delayed Response Affected Consumer. i. “Delayed Response Affected Consumer” means any Student Borrower for an NCSLT Loan that had an Exception Request made on or after January 1, 2015, that: (1) remains pending, or (2) was not decided within 30 days of the date of the request. b. “Affected Request” means:
i. Requests for Co-Signer Release; Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 4 of 64
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ii. Requests for COVID-related Natural Disaster Forbearance;
iii. Requests for Extension of COVID-related Payment Relief;
iv. Requests for SCRA Benefits; and v. Exception Requests for miscellaneous relief that do not fall into the above categories (“Requests for Miscellaneous Exceptions”).
c. “Borrower Request” means any request by a Student Borrower or Co-signer made on or after the Effective Date concerning an NCSLT Loan.
d. “Board” means Defendant PHEAA’s duly-appointed and acting Board of Directors.
e. “Board Executive Committee” means the duly-elected executive committee of Defendant PHEAA’s Board of Directors.
f. “Consumer Reporting Agency” or “CRA” means the definition set forth in 15 U.S.C. § 1681a(f). g. “Co-signer” means an obligor on an NCSLT Loan other than a Student Borrower.
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h. “Co-signer Release” means release of a Co-signer from all obligations of an NCSLT Loan.
i. “COVID-19 Emergency” means the national emergency concerning the novel coronavirus disease (COVID-19) outbreak, declared by the President as beginning on March 1, 2020, under the National Emergencies Act, 50 U.S.C. § 1601 et seq., and any extensions of that emergency. j. “Date of First Delinquency” means the date of the first 30day delinquency that led to a status or rating indicating the NCSLT Loan is not current and has not again become current, or in the case of bankruptcies or personal receivership, the date of the bankruptcy or personal receivership petition or notification. k. “Date Transaction Effective” means the data point in Defendant PHEAA’s system of record reflecting the historical date on which a retroactive transaction or other loan account adjustment should have taken effect. l. “Defendants” means the NCSLT Defendants and Defendant PHEAA, and their respective successors and assigns. Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 6 of 64
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m. “Defendant PHEAA” means Pennsylvania Higher Education Assistance Agency, d/b/a American Education Services, and its successors and assigns.
n. “Distribution Date” means: (i) for the Monthly Pay NCSLT Defendants, the 25th calendar day or if such day is not a business day, the next business day thereafter of each month; (ii) for The National Collegiate Student Loan Trust 2003-1, 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; and (iii) for The National Collegiate Student Loan Trust 2004-1 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.
o. “Effective Date” means the date on which this Order is entered by the Court.
p. “Elevated Borrower Request” means a sufficiently documented Borrower Request that Defendant PHEAA elevates for decision by an NCSLT-related Entity or, with respect to Borrower Requests for Co-signer Release only, by Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 7 of 64
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the Special Subservicer, under the amendments to the Servicing Guidelines described in paragraph 7 of this Order, or as they may be modified consistent with paragraph 9 of this Order.
q. “Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or their delegate.
r. “Exception Request” means any request by a Student Borrower or Co-signer made before the Effective Date that: i. at the time of the request, Defendant PHEAA lacked the authority to decide under the Servicing Guidelines, asserted it lacked the authority to decide under the Servicing Guidelines, or sent to another entity for decision, as provisionally identified during the Bureau’s investigation, and subject to validation and non-objection by the Bureau as described in paragraph 23; or ii. was for any form of payment relief due to the COVID- 19 Emergency that was eligible for a Natural Disaster Forbearance, as provisionally identified during the Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 8 of 64
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Bureau’s investigation, and subject to validation and non-objection by the Bureau as described in paragraph 23.
s. “Exception Type” means Defendant PHEAA’s categorization of the relief sought through an Exception Request. t. “Monthly Pay NCSLT Defendants” means NCSLT Defendants other than Quarterly Pay NCSLT Defendants. The Monthly Pay NCSLT Defendants 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.
u. “Natural Disaster Forbearance” means the 3-month forbearance for borrowers whose home or place of employment has been affected by a natural disaster made available to borrowers under the Servicing Guidelines. v. “NCSLT Defendants” means (1) The National Collegiate Master Student Loan Trust I, (2) The National Collegiate Student Loan Trust 2003-1, (3) The National Collegiate Student Loan Trust 2004-1, (4) The National Collegiate Student Loan Trust 2004-2, (5) The National Collegiate Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 9 of 64
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Student Loan Trust 2005-1, (6) The National Collegiate Student Loan Trust 2005-2, (7) The National Collegiate Student Loan Trust 2005-3, (8) The National Collegiate Student Loan Trust 2006-1, (9) The National Collegiate Student Loan Trust 2006-2, (10) The National Collegiate Student Loan Trust 2006-3, (11) The National Collegiate Student Loan Trust 2006-4, (12) The National Collegiate Student Loan Trust 2007-1, (13) The National Collegiate Student Loan Trust 2007-2, (14) The National Collegiate Student Loan Trust 2007-3, (15) The National Collegiate Student Loan Trust 2007-4, collectively or individually, and their respective successors and assigns. w. “NCSLT Loan” means any private student loan that is or was owned, held by, or securitized by the NCSLT Defendants. x. “NCSLT-related Entity” means any of the following entities in relation to any of the NCSLT 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 securitization documents. Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 10 of 64
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y. “Negative Information” means any period of 30-day delinquency, or greater, at any point in an NCSLT Loan’s history.
z. “Note Insurer” means the note insurer for The National Collegiate Master Student Loan Trust I, The National Collegiate Student Loan Trust 2007-3, and The National Collegiate Student Loan Trust 2007-4. aa. “Period of Military Service” means the definition in the Servicemembers Civil Relief Act, 50 U.S.C. § 3911(2)-(3). bb.
“Quarterly Pay NCSLT Defendants” means The National Collegiate Student Loan Trust 2003-1 and The National Collegiate Student Loan Trust 2004-1, which are quarterlypay 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 Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 11 of 64
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business day thereafter in the months of March, June, September, and December.
cc. “Related Consumer Action” means an affirmative private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendant PHEAA based on substantially the same facts as described in the Complaint. dd.
“Request for Co-signer Release” means any Exception Request for Co-Signer Release, made on or after January 1, 2015, that:
i. remains pending;
ii. was not decided within 30 days of the date of the request; or iii. was denied before November 1, 2021. ee. “Request for COVID-related Natural Disaster Forbearance” means any Exception Request for any form of payment relief because of the COVID-19 Emergency that was eligible for a Natural Disaster Forbearance, made on or after March 1, 2020, that:
i. remains pending;
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ii. was denied, and was not subsequently approved (without requiring resubmission of a new request) within 15 days of the date of the request; or iii. was approved, but not decided within 15 days of the date of the request.
ff. “Request for Extension of COVID-related Payment Relief” means any Exception Request for any form of payment relief because of the COVID-19 Emergency—except for a Request for COVID-related Natural Disaster Forbearance—made on or after March 1, 2020, that:
i. remains pending;
ii. was approved, but not decided within 30 days of the date of the request; or iii. was denied, but not decided within 30 days of the date of the request; and 1. the NCSLT Loan was eligible for another form of payment relief on the date of the request; and 2. the NCSLT Loan did not enter into another form of payment relief within 30 days of the date of the request.
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gg.
“Request for Miscellaneous Exception” means any Exception Request—except for a Request for Co-Signer Release, Request for COVID-related Natural Disaster Forbearance, Request for Extension of COVID-related Payment Relief, and Request for SCRA Benefits—made on or after January 1, 2015, that:
i. remains pending, or ii. was not decided within 30 days of the date of the request.
hh.
“Request for SCRA Benefits” means any Exception Request for SCRA Benefits, or a request for SCRA Benefits generated by Defendant PHEAA’s identification of a servicemember’s Period of Military Service through the Defense Manpower Data Center (DMDC), made on or after January 1, 2015, that:
i. remains pending;
ii. was not decided within 30 days of the date of the request; or iii. was denied before May 4, 2021. Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 14 of 64
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ii. “Servicemembers Civil Relief Act Benefits” or “SCRA Benefits” means the 6% interest rate cap benefit available to servicemembers during the Period of Military Service pursuant to the Servicemembers Civil Relief Act, 50 U.S.C. § 3937(a)(1)(B), or under the Servicing Guidelines, the April 19, 2021 letter to Defendant PHEAA from the Administrator, or Defendant PHEAA’s NCSLT Loan servicing policies, procedures, staff guidance, or alerts. jj. “Servicing Guidelines” means the Servicing Guidelines for TERI Loan Programs Serviced at Pennsylvania Higher Education Assistance Agency (d/b/a American Education Services), attached as Exhibit B to the September 28, 2006 Amended and Restated Private Student Loan Servicing Agreement Between Pennsylvania Higher Education Assistance Agency and The First Marblehead Corporation, and all subsequent amendments thereto, including but not limited to, letter-amendments which the Defendants commonly refer to as “Read and Agreed” letters. Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 15 of 64
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kk.
“Special Subservicer” means the entity that manages and oversees debt collection activities for charged-off NCSLT Loans, on behalf of each respective Trust. ll. “Student Borrower” means the obligor on an NCSLT Loan for whose educational expenses the loan was made. mm. “Supervision Director” means the Assistant Director of the Office of Supervision Policy for the Consumer Financial Protection Bureau, or their delegate. CONDUCT PROVISIONS I.
Prohibited Conduct IT IS ORDERED, under §§ 1053 and 1055 of the CFPA, that: 6.
Defendant PHEAA and its officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who receive actual notice of this Order, whether acting directly or indirectly, may not violate sections 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531 and 5536, and are prohibited from: a. misrepresenting that borrowers will receive a review and decision on a Borrower Request or Elevated Borrower Request within a specific time frame if they will not; Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 16 of 64
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b. failing to offer payment relief that borrowers request and for which they are eligible;
c. failing to advise borrowers on all payment relief options available to them when borrowers seek relief; d. misrepresenting any other fact material to borrowers concerning available loan benefits or payment relief options under the Servicing Guidelines; and e. referring or directing borrowers to contact any other entity involved in the operation of the NCSLT Defendants’ business activities unless that entity has explicitly agreed to communicate with borrowers regarding their loans. II.
Affirmative Requirements IT IS ORDERED, under §§ 1053 and 1055 of the CFPA, that: Timely Review and Decision of Exception Requests 7.
NCSLT Defendants and Defendant PHEAA have amended the Servicing Guidelines, as of May 1, 2024 and effective June 30, 2024 to ensure that the servicing of NCSLT Loans complies with the terms of this Order. The Servicing Guidelines, as amended, provide: Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 17 of 64
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a. instructions related to the review and decision of certain Borrower Requests;
b. a process through which Defendant PHEAA may escalate certain Elevated Borrower Requests for decision, which decision may then be communicated by an NCSLT-related Entity (including following consultation with other NCSLTrelated Entities and/or the Note Insurer, as applicable) or, with respect to Elevated Borrower Requests for Co-signer Release only, the Special Subservicer; and c. specific timeframes and deadlines for implementation of the steps described above and in compliance with paragraph 11 of this Order.
8.
Defendants must implement and adhere to the steps, deadlines, and timeframes outlined in the Servicing Guidelines with respect to Elevated Borrower Requests.
9.
Defendants may not implement modifications to the Servicing Guidelines with respect to Elevated Borrower Requests without 30 days prior notification to the Enforcement Director if such modifications result in reduced protection to borrowers. The Enforcement Director will have the discretion to make a determination of non-objection to the proposed Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 18 of 64
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modifications to the Servicing Guidelines with respect to Elevated Borrower Requests or direct Defendants to revise it. If the Enforcement Director directs Defendants to revise the proposed modifications to the Servicing Guidelines, Defendants must revise and resubmit the proposed modifications to the Servicing Guidelines within 30 days. 10.
Within 10 business days of Defendant PHEAA’s receipt of any Borrower Request, and in connection with any Borrower Request made after the effective date of the amendment to the Servicing Guidelines described in paragraph 7, Defendant PHEAA must review the Borrower Request and either:
a. decide the Borrower Request in accordance with the Servicing Guidelines and communicate that decision to the borrower; b. determine that the Borrower Request requires submission to an NCSLT-related Entity or the Special Subservicer in accordance with the Servicing Guidelines, and determine whether Defendant PHEAA reasonably believes it is in receipt of all necessary documents or information to submit the request as an Elevated Borrower Request; or c. contact the borrower to request additional documents or information Defendant PHEAA reasonably determines is Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 19 of 64
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necessary to submit an Elevated Borrower Request to an NCSLT-related Entity or the Special Subservicer in accordance with the Servicing Guidelines.
11.
Defendant PHEAA must, in connection with any Borrower Request made after the effective date of the amendment to the Servicing Guidelines described in paragraph 7:
a. submit Elevated Borrower Requests for Co-signer Release to the Special Subservicer, or any NCSLT-related Entity designated in any subsequent amendment to the Servicing Guidelines, for decision within five (5) business days of its determination that it received all necessary documents or information;
b. submit Elevated Borrower Requests, except those for Cosigner Release, to the NCSLT-related Entity designated in the Servicing Guidelines for decision within ten (10) business days of its determination that it received all necessary documents or information;
c. communicate the decision on an Elevated Borrower Request for Co-signer Release to a borrower within five (5) business days of the earlier of: (i) receipt of such a decision from the Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 20 of 64
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Special Subservicer, or any NCSLT-related Entity designated in any subsequent amendment to the Servicing Guidelines; or (ii) at the end of the 25 business-day period in which the Special Subservicer, or any NCSLT-related Entity designated in any subsequent amendment to the Servicing Guidelines, has to communicate the authorization (or non-authorization) to Defendant PHEAA. If Defendant PHEAA receives no response from the Special Subservicer, or any NCSLT-related Entity designated in any subsequent amendment to the Servicing Guidelines, at the end of the 25 business-day period, the Elevated Borrower Request will be deemed authorized; and d. communicate the decision on an Elevated Borrower Request, except those for Co-signer Release, to a borrower within the earlier of: (i) five (5) business days of receipt of such a decision from the NCSLT-related Entity designated in the Servicing Guidelines; or (ii) at the end of the 30 calendar-day period in which the NCSLT-related Entity designated in the Servicing Guidelines has to communicate the authorization (or non-authorization) to Defendant PHEAA (unless Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 21 of 64
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reasonably extended for good cause pursuant to the Servicing Guidelines as amended, which Defendant PHEAA must specifically communicate to the borrower). If Defendant PHEAA receives no response from the NCSLTrelated Entity designated in the Servicing Guidelines, at the end of the 30 calendar-day period, or the end of any time period reasonably extended for good cause pursuant to the Servicing Guidelines as amended, Defendant PHEAA will be deemed authorized to implement its recommended action submitted with the Elevated Borrower Request. 12.
If there is any inconsistency between the amendment to the Servicing Guidelines described in paragraph 7, and paragraph 11 of this Order, the amendment to the Servicing Guidelines described in paragraph 7 shall control the processes for Elevated Borrower Requests. Accurate and Complete Information to Borrowers 13.
Defendant PHEAA must ensure that borrowers are provided with complete and accurate information about available loan benefits and payment relief options under the Servicing Guidelines, including the availability of an Elevated Borrower Request process in certain circumstances, and must affirmatively provide this information when a Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 22 of 64
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borrower inquires about repayment options, misses a payment, or makes a Borrower Request.
Policies, Procedures, and Training 14.
Within 60 days of the Effective Date, Defendant PHEAA must implement new or modified policies and procedures in compliance with paragraphs 6-13, including training for employees or agents on the new or modified policies and procedures.
III.
Compliance Plan for Defendant PHEAA IT IS FURTHER ORDERED that:
15.
Within 30 days of the Effective Date, Defendant PHEAA must create and implement a comprehensive compliance plan designed to ensure that Defendant PHEAA’s student loan servicing activities for NCSLT Loans comply with the CFPA and the terms of this Order (PHEAA Compliance Plan). The PHEAA Compliance Plan must include, at a minimum: a. detailed steps for addressing each action required of Defendant PHEAA by this Order;
b. a mechanism to ensure that Defendant PHEAA’s Board is kept apprised of the status of compliance actions; and Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 23 of 64
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c. specific timeframes and deadlines for implementation of the steps described above.
16.
Defendant PHEAA will provide the PHEAA Compliance Plan to the Bureau upon request.
IV.
Role of Defendant PHEAA’s Board and Executives IT IS FURTHER ORDERED that:
17.
Defendant PHEAA’s Chief Executive Officer and Senior Vice Presidents (collectively “Defendant PHEAA’s Executives”), Board, and Board Executive Committee have the ultimate responsibility for ensuring that Defendant PHEAA complies with this Order. 18.
Defendant PHEAA’s Executives and Board Executive Committee must review all plans and reports required by this Order, and any submissions to the Bureau prior to such submission. 19.
One year after the Effective Date, Defendant PHEAA must submit to the Supervision Director an accurate written compliance progress report (Compliance Report) that has been approved by Defendant PHEAA’s Executives and the Board Executive Committee, the accuracy of which is sworn to under penalty of perjury, and which, at a minimum: Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 24 of 64
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a. describes the steps that the Defendant PHEAA’s Executives, Board, and Board Executive Committee have taken to reasonably assess whether Defendant PHEAA is complying with the Redress Plan, Compliance Plan, and each applicable paragraph and subparagraph of this Order; b. describes in detail whether and how Defendant PHEAA has complied with the Redress Plan, Compliance Plan, and each applicable paragraph and subparagraph of this Order, including the manner of verification of such compliance and any corrective actions taken to remedy potential noncompliance with the applicable requirement, paragraph, or subparagraph; and c. attaches a copy of each Order Acknowledgment obtained under Section IX, unless previously submitted to the Bureau. 20.
Defendant PHEAA’s Executives and Board Executive Committee must:
a. authorize whatever actions are necessary for Defendant PHEAA to assess whether it is complying with the Redress Plan, Compliance Plan, and each applicable paragraph and subparagraph of this Order;
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b. authorize whatever actions, including corrective actions, are necessary for Defendant PHEAA to fully comply with the Redress Plan, PHEAA Compliance Plan, and each applicable paragraph and subparagraph of this Order; and c. require timely reporting by management to Defendant PHEAA’s Executives, Board, and Board Executive Committee on the status of compliance obligations.
MONETARY PROVISIONS V.
Order to Pay Redress IT IS FURTHER ORDERED that:
21.
For each of the Monthly Pay NCSLT Defendants, no later than the second Distribution Date after the month in which the Effective Date occurs for such NCSLT Defendant, and for each of the Quarterly Pay NCSLT Defendants, no later than the first Distribution Date after the month in which the Effective Date occurs for such NCSLT Defendant, and for Defendant PHEAA, within 30 days of the Effective Date, Defendants must reserve, in the aggregate, an earmarked amount not less than $2,886,817 for the purpose of providing redress to Affected Consumers as required by this Section. Defendant PHEAA shall be deemed to have Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 26 of 64
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complied with this paragraph by reserving an amount equal to Defendant PHEAA’s estimated portion of responsibility for the redress payments described in Section V of this Order, according to a cost allocation agreement between the NCSLT Defendants and Defendant PHEAA. Any time limits for performance under this paragraph may be extended by mutual written agreement of the parties with notice to the Court of any such agreement. Other modifications may be made only upon approval of the Court, by motion of any party. In the event that additional consumer redress is required to be paid under the terms of this Order, such additional consumer redress amounts shall be paid exclusively by Defendant PHEAA and not any of the NCSLT Defendants. NCSLT Defendants shall be required to transmit to Defendant PHEAA their portion of the redress payments, according to the cost allocation agreement between the NCSLT Defendants and Defendant PHEAA, on or before the 45th day following the Enforcement Director’s non-objection to the Final Redress Plan. 22.
Defendants must, in accordance with the provisions of the Redress Plans described in paragraphs 23-26: a. pay $200 in redress to all Delayed Response Affected Consumers; and Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 27 of 64
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b. pay and provide redress to all Affected Consumers consistent with the terms identified in the Review of Affected Requests, paragraphs 33-48.
23.
Within 30 days of the Effective Date, Defendants jointly must submit to the Enforcement Director for review and non-objection a comprehensive written plan for assessing the scope of redress consistent with this Order (Initial Redress Plan). The Enforcement Director will have the discretion to make a determination of non-objection to the Initial Redress Plan or direct Defendants to revise it. If the Enforcement Director directs Defendants to revise the Initial Redress Plan, Defendants must revise and resubmit the Initial Redress Plan to the Enforcement Director within 15 days. After receiving notification that the Enforcement Director has made a determination of non-objection to the Initial Redress Plan, Defendants must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Initial Redress Plan. 24.
The Initial Redress Plan must:
a. establish a Redress Committee for coordination and oversight of the implementation of the redress required by Section V of this Order. The Redress Committee shall: Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 28 of 64
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i. include representatives of the NCSLT Defendants, one or more of the NCSLT-related Entities, the Special Subservicer, Defendant PHEAA, and such other entities as have significant roles in executing the Redress Plans;
ii. facilitate actions necessary for NCSLT Defendants, NCSLT-related Entities, the Special Subservicer, Defendant PHEAA, or other service providers to carry out the Redress Plans in a timely and satisfactory manner;
iii. facilitate timely reporting by entities involved in evaluating, implementing, and effectuating borrower redress under the Redress Plans on the status of redress obligations; and iv. provide for review of plans and reports related to evaluating, implementing, and effectuating borrower redress, and submissions to the Bureau, including the NCSLT Redress Report described in paragraph 32; Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 29 of 64
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b. identify, and describe the methodology for identifying, the proposed population of Exception Requests, Affected Consumers, and Affected Requests;
c. describe Defendants’ methodology to be used to complete the Review of Affected Requests and determine the amount of redress that Defendants will provide to each Affected Consumer to comply with paragraph 22; and d. present a timeline for completion.
25.
Within 30 days of the completion of the Review of Affected Requests described in paragraphs 33-48, Defendants jointly must submit to the Enforcement Director for review and non-objection a comprehensive written plan for providing redress consistent with this Order (“Final Redress Plan,” and, together with the Initial Redress Plan, the “Redress Plans”). The Enforcement Director will have the discretion to make a determination of non-objection to the Final Redress Plan or direct Defendants to revise it. If the Enforcement Director directs Defendants to revise the Final Redress Plan, Defendants must revise and resubmit the Final Redress Plan to the Enforcement Director within 15 days. After receiving notification that the Enforcement Director has made a determination of non-objection to the Final Redress Plan, Defendants must Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 30 of 64
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implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Final Redress Plan. 26.
The Final Redress Plan must:
a. include a final list of all Affected Consumers and the amount of redress that Defendants will provide to each Affected Consumer to comply with paragraph 22; b. specify how Defendants will comply with each provision of paragraphs 33-48;
c. include the form of the letter and envelope or electronic communication (Redress Notice), as applicable, to be sent notifying Affected Consumers who are entitled to redress of their right to redress; the Redress Notice must include a statement that the payment is made in accordance with the terms of this Order, including that there is not an issuance of a 1099, as referenced in paragraph 33, and the factual basis for that non-issuance; Defendants must not include in any envelope containing a Redress Notice any materials other than the approved Redress Notice and redress checks, unless Defendants have written confirmation from the Enforcement Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 31 of 64
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Director that the Bureau does not object to the inclusion of such additional materials;
d. describe the process for providing redress to Affected Consumers, and must include the following requirements: i.
for any Affected Consumer that does not have an NCSLT Loan serviced by PHEAA at the time of the redress payment, Defendants must send each Affected Consumer, or their authorized representative, a redress check (Redress Check) in the amount of the refund required by paragraph 22;
ii.
Defendants must send Redress Checks by United States Postal Service first-class mail, address correction service requested;
iii.
prior to sending Redress Notices and Redress Checks, Defendants must make reasonable attempts to obtain a current address for each Affected Consumer that does not have an NCSLT Loan serviced by PHEAA at the time of the redress payment, by using, at a minimum, the National Change of Address System (NCAS), any NCSLT-specific databases maintained by the Special Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 32 of 64
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Subservicer or any NCSLT-related Entity, or their agents or affiliates, and skip-tracing. If no updated address is obtained through such methods, Defendants may mail the Redress Notice and the Redress Check to the consumer’s last known mailing address; iv.
if a Redress Check or Redress Notice is returned to Defendants as undeliverable, Defendants must make additional reasonable attempts to contact the Affected Consumer and obtain a current address using a commercially available database other than the NCAS or by obtaining from any NCSLT-specific database of the Special Subservicer or any NCSLT-related Entity, or their agents or affiliates, the Affected Consumer’s last known email address or phone number and contacting the last known email address or phone number. Defendants must promptly remail each returned Redress Check and Redress Notice to each Affected Consumer’s current address, if any, obtained through such reasonable attempts; and Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 33 of 64
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v.
if a Redress Check that Defendants have attempted to send to an Affected Consumer is returned to Defendants, Defendants must retain the redress amount of such Affected Consumer for a period of one hundred and eighty (180) days from the date the check was mailed or re-mailed, whichever is later, during which period such amount may be claimed by such Affected Consumer;
e. set forth all procedures, deadlines, and timeframes for completing each step of the Final Redress Plan, consistent with the terms of this Order;
f. identify the entities with respect to the NCSLT Defendants and identify the officers, agents, servants, employees, and attorneys with respect to Defendant PHEAA responsible for executing administration of the Final Redress Plan; g. provide that nothing in the Final Redress Plan creates any new collection, credit reporting, or litigation rights on behalf of Defendants;
h. provide that Defendants will pay all costs of administering redress as required by this Section; and Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 34 of 64
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i. identify an independent third-party auditor (Auditor) to produce a Redress Report at the completion of the Final Redress Plan. The Auditor’s expenses shall be paid for by Defendants.
27.
Defendants must mail all Redress Checks and Redress Notices within 60 days after the Enforcement Director has made a determination of non-objection to the Final Redress Plan. 28.
Within 30 days of completing the Final Redress Plan, Defendants must ensure that the Auditor submits its Redress Report to the Enforcement Director detailing:
a. the consumers and consumer accounts who received redress; b. the total amount of redress paid to those consumers; c. the form of redress received by each consumer; d. any remainder of funds to be wired to the Bureau pursuant to paragraph 29; and e. the work conducted by the Auditor to validate the accuracy of the Redress Report.
29.
Within 30 days of completing the Final Redress Plan, if the amount of redress provided to Affected Consumers is less than $2,886,817, Defendants must pay to the Bureau, by wire transfer to the Bureau or to the Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 35 of 64
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Bureau’s agent, and according to the Bureau’s wiring instructions, the difference between the amount of redress provided to Affected Consumers and $2,886,817. Unclaimed payments to Affected Consumers shall be considered escheated property and handled pursuant to applicable state unclaimed property laws.
30.
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 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. 31.
Defendants may not condition the payment of any redress to any Affected Consumer under this Order on any consumer waiving any right.
32.
One year after the Effective Date, the NCSLT Defendants must submit to the Enforcement Director an accurate written redress progress report (NCSLT Redress Report), which, at a minimum: a. Describes the steps that the NCSLT Defendants and the Redress Committee have taken to reasonably assess whether Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 36 of 64
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the NCSLT Defendants are complying with the Final Redress Plan;
b. describes in detail whether and how the NCSLT Defendants have complied with the Final Redress Plan, which may be based on reliance on the Auditor’s Redress Report, and any corrective actions taken to remedy potential non-compliance with the applicable requirement, paragraph, or subparagraph; and c. attaches a copy of each Order Acknowledgment obtained under Section VIII of the NCSLT Defendants’ Order, unless previously submitted to the Bureau.
Review of Affected Requests 33.
Defendants, or their duly authorized agents or representatives, must conduct a review of all Affected Requests and provide redress in accordance with the provisions described in paragraphs 33-48. Defendants must ensure that none of the relief is structured in a manner that necessitates issuing a Form 1099 to an Affected Consumer. Accordingly, NCSLT Defendants shall ensure that neither NCSLT Defendants, nor any NCSLT-related Entity, nor the Special Subservicer will issue a Form 1099-C or otherwise report cancellation of debt income with respect to Affected Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 37 of 64
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Consumers, and Defendant PHEAA will not issue a Form 1099-C or otherwise report cancellation of debt income with respect to Affected Consumers.
Requests for Co-Signer Release 34.
For Requests for Co-signer Release on NCSLT Loans that are either performing or that have been charged-off as of the Effective Date, and were eligible for Co-signer Release as of the date of the request, pursuant to the Servicing Guidelines and any other applicable lender criteria as of January 2015, Defendants must: a. grant the requested Co-signer Release, effective as of the date of the request;
b. for the Co-signer, request addition of the “T” code in the ECOA field associated with the NCSLT Loans, and update credit reporting to identify and correct any fields where Negative Information was reported after the date of the request, including but not limited to payment history profile, payment rating, and Date of First Delinquency, to all Consumer Reporting Agencies (CRAs) to which the information was furnished;
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c. satisfy, release, or move to vacate any judgments obtained against a Co-signer after the date of the request, with no charges or cost to the Affected Consumers, cease any postjudgment enforcement activities as to the Co-signer, and remove, withdraw, or terminate any active wage garnishments, bank levies, or other means of enforcing a judgment as to the Co-signer;
d. provide documentation of satisfaction, release, or vacatur to all CRAs to which the information was furnished, and to the Affected Consumers;
e. cease any debt collection efforts against the Co-signer and dismiss with prejudice any pending collections lawsuits against the Co-signer;
f. reimburse to the Co-signer any payments that can be identified as from the Co-signer made after the date of the request with no impact to the Student Borrower’s remaining balance;
g. for charged-off loans, reimburse to the Co-signer any late fees, attorney’s fees, court fees, or other fees that can be identified as paid by the Co-signer after the date of the Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 39 of 64
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request with no impact to the Student Borrower’s remaining balance, and for performing loans, waive any late fees or other fees assessed after the date of the request, and ensure any reimbursements of fees paid are applied with the Date Transaction Effective as the date that the fee was originally assessed; and h. ensure the above provisions do not result in a change to the last payment date or Date of First Delinquency for the Student Borrower recorded in Defendant PHEAA’s, any NCSLT-related Entity’s, any NCSLT Defendants’ service providers’, or the Special Subservicer’s systems, and ensure any post-judgment collections that are credited to the account do not result in a change to the last payment date or Date of First Delinquency.
35.
For Requests for Co-signer Release on NCSLT Loans that have been paid in full as of the Effective Date, and were eligible for Co-signer Release as of the date of the request, pursuant to the Servicing Guidelines and any other applicable lender criteria as of January 2015, Defendants must:
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a. for the Co-signer, request addition of the “T” code in the ECOA field associated with the NCSLT Loans, and update credit reporting to identify and correct any fields where Negative Information was reported after the date of the request, including but not limited to payment history profile, payment rating, and Date of First Delinquency; b. reimburse to the Co-signer any late fees, attorney’s fees, court fees, or other fees assessed against the Co-signer after the date of the request with no impact to the Student Borrower’s remaining balance; and c. reimburse to the Co-signer any payments that can be identified as from the Co-signer made after the date of the request with no impact to the Student Borrower’s remaining balance.
36.
For Requests for Co-signer Release on NCSLT Loans that would have been denied for failure to supply all necessary documents, Defendants must treat the request as eligible for Co-signer Release as of the date of the request, and remediation shall be consistent with the provisions of paragraphs 34-35, as applicable.
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37.
For Requests for Co-signer Release on NCSLT Loans that were not eligible for Co-signer Release as of the date of the request, pursuant to the Servicing Guidelines and any other applicable lender criteria as of January 2015, Defendants must provide a denial notice, and include a description of the reason why the request was denied, and any required criteria for approval.
Requests for Servicemembers Civil Relief Act (SCRA) Benefits 38.
For Requests for SCRA Benefits on NCSLT Loans that are performing as of the Effective Date, and were eligible for SCRA Benefits as of the date of the request, Defendants must: a. to the extent not already completed, retroactively apply a 6% interest rate cap during the Student Borrower or Co-signer’s Period of Military Service and reimburse any overpayments to the Student Borrower;
b. submit corrections to all CRAs to whom Defendants furnished to correct all fields that were furnished incorrectly as a result of incorrectly determining the payment amount or any delinquency based on an application to the account of an interest rate greater than a 6% interest rate; Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 42 of 64
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c. if the Date of First Delinquency is more than seven years before the Effective Date, cease furnishing on the tradeline; d. waive any late fees or other fees assessed after the date of the request, and ensure any reimbursement of fees paid are applied with the Date Transaction Effective as the date that the fee was originally assessed; and e. ensure the above provisions do not result in a change to the last payment date or Date of First Delinquency recorded in Defendant PHEAA’s, any NCSLT-related Entity’s, any NCSLT Defendants’ service providers’, or the Special Subservicer’s systems.
39.
For Requests for SCRA Benefits on NCSLT Loans that have been charged-off as of the Effective Date, were eligible for SCRA Benefits as of the date of the request and had an interest rate above 6% at any time during the Student Borrower or Co-signer’s Period of Military Service, Defendants must:
a. to the extent not already completed, retroactively apply a 6% interest rate cap during the Student Borrower or Co-signer’s Period of Military Service and reimburse any overpayments to the Student Borrower;
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b. submit corrections to all CRAs to whom Defendants furnished to correct all fields that were furnished incorrectly as a result of incorrectly determining the payment amount or any delinquency based on an application to the account of an interest rate greater than a 6% interest rate; c. if the Date of First Delinquency is more than seven years before the Effective Date, cease furnishing on the tradeline; d. if the Date of First Delinquency is before the date on which the 6% interest rate cap was retroactively applied, satisfy, release, or move to vacate any judgments obtained since the date of request, with no charges or cost to the Affected Consumers, and cease any post-judgment enforcement activities, and remove, withdraw, or terminate any active wage garnishments, bank levies, or other means of enforcing a judgment;
e. provide documentation of satisfaction, release, or vacatur to all CRAs to which the information was furnished and to the Affected Consumers;
f. if the Date of First Delinquency is before the date on which the 6% interest rate cap was retroactively applied, cease any Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 44 of 64
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debt collection efforts and dismiss any pending collections lawsuits with prejudice;
g. reimburse to the Student Borrower any late fees, attorney’s fees, court fees, and other fees paid since the date of the request;
h. if the Date of First Delinquency is before the date on which the 6% interest rate cap was retroactively applied, must not file a lawsuit to collect the NCSLT Loan or file proofs of claims in bankruptcy courts, and must prohibit any service provider from filing a lawsuit to collect the NCSLT Loan or filing proofs of claims in bankruptcy courts; and i. if the Date of First Delinquency is before the date on which the 6% interest rate cap was retroactively applied, must condition any future sale of the NCSLT Loan on the purchaser agreeing to a prohibition against filing a lawsuit to collect the debt or filing proofs of claims in bankruptcy courts.
40.
For Requests for SCRA Benefits on NCSLT Loans that have been paid in full as of the Effective Date, and were eligible for SCRA Benefits as of the date of the request, Defendants must: Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 45 of 64
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a. to the extent not already completed, retroactively apply a 6% interest rate cap during the Student Borrower or Co-signer’s Period of Military Service, and reimburse any overpayments to the Student Borrower;
b. submit corrections to all CRAs to whom Defendants furnished to correct all fields that were furnished incorrectly as a result of incorrectly determining the payment amount or any delinquency based on an application to the account of an interest rate greater than a 6% interest rate; and c. reimburse any late fees, attorney’s fees, court fees, and other fees paid since the date of the request. 41.
For Requests for SCRA Benefits on NCSLT Loans that were not eligible for SCRA Benefits as of the date of the request, Defendants must provide a denial notice, and include a description of the reason why the request was denied, and any required criteria for approval. Requests for COVID-related Natural Disaster Forbearance 42.
For any Request for COVID-related Natural Disaster Forbearance on NCSLT Loans, Defendants must: a. for loans that are performing or paid in full as of the Effective Date, and have any Negative Information reported Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 46 of 64
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within three months after the date of the request, update credit reporting to all CRAs to which the information was furnished to identify and correct any fields where Negative Information was reported, including but not limited to payment history profile, payment rating, and Date of First Delinquency, and furnish the tradeline as though a forbearance had been applied, including any administrative forbearance that could have been used to bring the loan current before the date of the request; b. pay an additional $150 in redress to any Affected Consumers that made a payment between the date of the request and any COVID-related Natural Disaster Forbearance approval within three months after the date of the request, with no impact to the Affected Consumers’ remaining balance; c. for loans that have been paid in full or charged-off as of the Effective Date, reimburse to the Student Borrower any late fees, attorney’s fees, court fees, or other fees paid within three months after the date of the request; d. for performing loans as of the Effective Date, waive any late fees, attorney’s fees, court fees, and other fees assessed Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 47 of 64
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within three months after the date of the request, and ensure any reimbursement of fees paid are applied with the Date Transaction Effective as the date that the fee was originally assessed; and e. ensure the above provisions do not result in a change to the last payment date or, for charged-off loans only, the Date of First Delinquency, recorded in Defendant PHEAA’s, any NCSLT-related Entity’s, any NCSLT Defendants’ service providers’, or the Special Subservicer’s systems. Requests for Extension of COVID-related Payment Relief 43.
For Requests for Extension of COVID-related Payment Relief on NCSLT Loans that are performing as of the Effective Date, Defendants must:
a. for loans that have any Negative Information reported within 12 months after the date of the request, update credit reporting to all CRAs to which the information was furnished to identify and correct any fields where Negative Information was reported, including but not limited to payment history profile, payment rating, and Date of First Delinquency, and furnish the tradeline as though a forbearance had been Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 48 of 64
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applied, including any administrative forbearance that could have been used to bring the loan current before the date of the request;
b. waive any late fees or other fees assessed within 12 months after the date of the request, and ensure any reimbursement of fees paid are applied with the Date Transaction Effective as the date that the fee was originally assessed; c. ensure the above provisions do not result in a change to the last payment date recorded in Defendant PHEAA’s, any NCSLT-related Entity’s, any NCSLT Defendants’ service providers’, or the Special Subservicer’s systems; and d. ensure the above provisions do not result in a change to the remaining payment relief options available to the Affected Consumers.
44.
For Requests for Extension of COVID-related Payment Relief on NCSLT Loans that have been charged-off as of the Effective Date, Defendants must:
a. if the Date of First Delinquency is more than seven years before the Effective Date, cease furnishing on the tradeline; Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 49 of 64
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b. reimburse to the Student Borrower any late fees, attorney’s fees, court fees, and other fees paid within 12 months after the date of the request; and c. ensure the above provisions do not result in a change to the last payment date recorded or Date of First Delinquency in Defendant PHEAA’s, any NCSLT-related Entity’s, any NCSLT Defendants’ service providers’, or the Special Subservicer’s systems.
45.
For Requests for Extension of COVID-related Payment Relief on NCSLT Loans that have been paid in full as of the Effective Date, Defendants must:
a. for loans that have any Negative Information reported within 12 months after the date of the request, update credit reporting to all CRAs to which the information was furnished to identify and correct any fields where Negative Information was reported, including but not limited to payment history profile, payment rating, and Date of First Delinquency, and furnish the tradeline as though a forbearance had been applied, including any administrative forbearance that could Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 50 of 64
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have been used to bring the loan current before the date of the request; and b. reimburse to the Student Borrower any late fees, attorney’s fees, and any other fees paid within 12 months after the date of the request.
Requests for Miscellaneous Exception 46.
For Requests for Miscellaneous Exception with an Exception Type that references deferment, forbearance, reduced payment, repayment, lower payment, lower repayment, or additional options, Defendants must provide redress as if the request was a Request for Extension of COVIDrelated Payment Relief, and remediation shall be consistent with the provisions of paragraphs 43-45, as applicable. 47.
For Requests for Miscellaneous Exception with an Exception Type that references Natural Disaster Forbearance, Defendants must provide redress as if the request was a Request for COVID-related Natural Disaster Forbearance, and remediation shall be consistent with the provisions of paragraph 42.
48.
For Requests for Miscellaneous Exception with an Exception Type not described in paragraphs 46-47, Defendants must assess what the response to the Exception Request would have been on the date of the Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 51 of 64
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request, pursuant to the applicable Servicing Guidelines and any other applicable lender criteria as of January 2015, and, if the Exception Request would have been granted, propose in the Final Redress Plan for each such Exception Type specific remediation based on the nature of the request and the payment status of the NCSLT Loan. The categorization and treatment of each Request for Miscellaneous Exception with an Exception Type not described above shall be detailed in the Redress Plans, subject to nonobjection by the Enforcement Director pursuant to paragraphs 23-26. VI.
Order to Pay Civil Money Penalty IT IS FURTHER ORDERED that:
49.
Under § 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint, Defendant PHEAA must pay a civil money penalty of $1,750,000 to the Bureau. 50.
Within 30 days of the Effective Date, Defendant PHEAA 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. 51.
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).
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52.
Defendant PHEAA 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, Defendant PHEAA 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. 53.
To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendant PHEAA may not argue that it is entitled to, nor may Defendant PHEAA 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. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against Defendant PHEAA based on the civil money penalty paid in this action or based on any Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 53 of 64
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payment that the Bureau makes from the Civil Penalty Fund, Defendant PHEAA must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau, and pay the amount of the offset or reduction 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.
VII.
Additional Monetary Provisions IT IS FURTHER ORDERED that:
54.
In the event of any default on Defendant PHEAA’s 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.
55.
Defendant PHEAA relinquishes 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 Defendant PHEAA. 56.
Defendant PHEAA acknowledges that its Taxpayer Identification Number (Social Security Number or Employer Identification Number), which Defendant PHEAA previously submitted to the Bureau, Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 54 of 64
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may be used for collecting and reporting on any delinquent amount arising out of this Order, in accordance with 31 U.S.C. § 7701. 57.
Within 30 days of the entry of a final judgment, order, or settlement in a Related Consumer Action, Defendant PHEAA must notify the Supervision Director of the final judgment, order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendant PHEAA 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.
COMPLIANCE PROVISIONS VIII.
Reporting Requirements IT IS FURTHER ORDERED that:
58.
Defendant PHEAA 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 Defendant PHEAA; or a change in Defendant Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 55 of 64
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PHEAA's name or address. Defendant PHEAA must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, whichever is sooner. 59.
Within 7 days of the Effective Date, Defendant PHEAA must: a. designate at least one telephone number and email, physical, and postal addresses as points of contact that the Bureau may use to communicate with Defendant PHEAA; and b. designate at least one telephone number and email, physical, and postal addresses as points of contact for consumers with inquiries related to consumer relief under the Order. 60.
Defendant PHEAA must report any change in the information required to be submitted under paragraph 59 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner.
IX.
Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:
61.
Within 7 days of the Effective Date, Defendant PHEAA must submit to the Supervision Director an acknowledgment of receipt of this Order, sworn under penalty of perjury. Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 56 of 64
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62.
Within 30 days of the Effective Date, Defendant PHEAA must deliver a copy of this Order to its Board, each of its Board Executive Committee members, Senior Vice Presidents, and Chief Executive Officer, as well as to any managers, employees, service providers, or other agents and representatives who have responsibilities related to the subject matter of this Order.
63.
For 5 years from the Effective Date, Defendant PHEAA must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section VIII, any future board members and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who will have responsibilities related to the subject matter of this Order before they assume their responsibilities.
64.
Defendant PHEAA 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 all persons receiving a copy of this Order under this Section.
65.
Ninety (90) days from the Effective Date, Defendant PHEAA must submit to the Bureau a list of all persons and their titles to whom this Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 57 of 64
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Order was delivered through that date under this Section and a copy of all signed and dated statements acknowledging receipt of this Order under paragraph 64.
X.
Recordkeeping IT IS FURTHER ORDERED that:
66.
For a period of 5 years following the Effective Date, Defendant PHEAA must create the following business records: a. all documents and records necessary to demonstrate full compliance with the Compliance Plan, Redress Plan, Redress Report, and each provision of this Order, including all submissions to the Bureau;
b. all documents and records pertaining to the Redress Plan, described in Section V above;
c. copies of all customer service scripts; training materials; websites; communication templates; and other materials related to or presented to consumers with NCSLT Loans, including any such materials used by a third party on Defendant PHEAA’s behalf;
d. all consumer complaints and refund requests related to Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 58 of 64
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consumers with NCSLT Loans (whether received directly or indirectly, such as through a third party), including all Exception Requests, and any responses to those complaints or requests; and e. records showing, for each service provider providing services related to NCSLT Loans, the name of a point of contact, and that person’s telephone number, email, physical, and postal address, job title or position, dates of service, and, if applicable, the reason for termination. 67.
Defendant PHEAA must retain these documents and records for 5 years after creation. 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.
68.
Defendant PHEAA must make the documents identified in paragraph 66 available to the Bureau upon the Bureau’s request. XI.
Notices IT IS FURTHER ORDERED that:
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69.
Unless otherwise directed in writing by the Bureau, Defendant PHEAA must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. The National Collegiate Master Student Loan Trust I, et al., Case No. [Docket #],” and send them by email to [email protected]:
ATTN: Supervision Director Consumer Financial Protection Bureau Office of Supervision Policy and ATTN: Enforcement Director Consumer Financial Protection Bureau Office of Enforcement.
XII.
Cooperation with the Bureau IT IS FURTHER ORDERED that:
70.
Defendant PHEAA must cooperate fully to help the Bureau determine the identity and location of, and the amount of injury sustained by, each Affected Consumer. Defendant PHEAA must provide such Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 60 of 64
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information in its or its agents’ possession or control within 14 days of receiving a written request from the Bureau. 71.
Defendant PHEAA must remain registered for the Bureau’s Company Portal and in connection with responding to consumer complaints and inquiries, whether acting directly or indirectly, must comply with the requirements that §§ 1034(b) and (c) of the CFPA, 12 U.S.C. §§ 5534(b) and (c), imposes on covered persons subject to supervision and primary enforcement by the Bureau pursuant to section 1025 of the CFPA, 12 U.S.C. § 5515.
72.
Unless otherwise prohibited by law or regulation, Defendant PHEAA must identify in its Redress Notice to Affected Consumers, described in paragraph 26(c), that they can file a complaint with the Bureau and provide the applicable telephone, website, and mailing information to do so.
XIII.
Compliance Monitoring IT IS FURTHER ORDERED that:
73. Within 14 days of receipt of a written request from the Bureau, Defendant PHEAA must submit additional compliance reports or other requested information related to the NCSLT Loans subject to this Order, Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 61 of 64
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which must be sworn under penalty of perjury; provide sworn testimony; or produce documents.
74.
For purposes of this Section, the Bureau may communicate directly with Defendant PHEAA, unless Defendant PHEAA retains counsel related to these communications.
75.
Defendant PHEAA must permit Bureau representatives to interview any employee or other person affiliated with Defendant PHEAA who has agreed to such an interview regarding: (a) the NCSLT Loans related to this Order, (b) anything related to or associated with the conduct described in the Complaint, or (c) compliance with this Order. The person interviewed may have counsel present.
76.
Nothing in this Order will limit the Bureau’s lawful use of compulsory process under 12 C.F.R. § 1080.6. XIV.
Transfer or Assignment of Operations 77.
For a period of 5 years following the Effective Date, should Defendant PHEAA seek to transfer or assign all or part of its student loan servicing operations regarding the NCSLT Loans that are subject to this Order, Defendant PHEAA must, as a condition of sale, obtain the written agreement of the transferee or assignee to comply with all applicable Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 62 of 64
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provisions of this Order.
XV.
Release 78.
The Bureau releases and discharges Defendant PHEAA from all potential liability for law violations that the Bureau has or might have asserted based on the allegations of the Complaint, to the extent such conduct occurred before the Effective Date and the Bureau knows about such conduct as of the Effective Date. The Bureau may use the practices described in the Complaint in future enforcement actions against Defendant PHEAA and its 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 this Order, or to seek penalties for any violations of this Order.
XVI.
Retention of Jurisdiction IT IS FURTHER ORDERED that:
79.
The Court will retain jurisdiction of this matter for the purpose of enforcing this Order.
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XVII.
Service 80.
This Order may be served upon Defendant PHEAA by electronic mail, certified mail, or United Parcel Service, either by the United States Marshal, the Clerk of the Court, or any representative or agent of the Bureau.
IT IS SO ORDERED.
DATED this 1st day of October, 2024.
_________________________________ United States District Court Judge s/ Jennifer P. Wilson Case 1:24-cv-00756-JPW Document 51 Filed 10/01/24 Page 64 of 64
Stipulation ()
PDF of this document (12 pages)
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UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF PENNSYLVANIA CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff, v.
PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY, et al., Defendants.
Case No.
1:24-cv-00756-JPW MODIFIED STIPULATED FINAL JUDGMENT AND ORDER The Consumer Financial Protection Bureau (“Bureau”) commenced this civil action on May 6, 2024 to obtain injunctive and monetary relief and civil penalties from Pennsylvania Higher Education Assistance Agency (“PHEAA”), also doing business as American Education Services (“AES”) and The National Collegiate Master Student Loan Trust I, The National Collegiate Student Loan Trust 2003-1, The National Collegiate Student Loan Trust 2004-1, The National Collegiate Student Loan Trust 2004-2, The National Collegiate Student Loan Trust 2005-1, The National Collegiate Student Loan Trust 2005-2, The National Collegiate Student Loan Trust 2005-3, The National Collegiate Student Loan Trust 2006-1, The National Collegiate Student Loan Trust 2006-2, The National Collegiate Student Loan Trust 2006-3, The National Collegiate Student Loan Trust 2006-4, The National Collegiate Student Loan Trust 2007-1, The National Collegiate Student Loan Trust 2007-2, The National Collegiate Student Loan Trust 2007-3, The National Collegiate Student Loan Trust 2007-4 (collectively “NCSLTs” or “the Trusts”). The Complaint alleges violations of sections Case 1:24-cv-00756-JPW Document 72 Filed 12/08/25 Page 1 of 12
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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 owned by the Trusts. The Bureau and Defendants agree to entry of this Modified Stipulated Final Judgment and Order (“Order”), without adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint.
FINDINGS 1.
This Court has personal jurisdiction over the parties and jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1331 and 28 U.S.C. § 1345.
2.
Defendants neither admit nor deny the allegations in the Complaint, except as specified in this Order. Only for purposes of this action, Defendants admit the facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action. 3.
Defendants waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order and 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 agrees to bear its own costs and expenses, including, without limitation, attorneys’ fees.
4.
Entry of this Order is in the public interest. The prior orders issued on October 1, 2024, Dkt. Nos. 50–51, are hereby modified and replaced by this Order.
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DEFINITIONS 5.
The following definitions apply to this Order: a. “Affected Consumer” means any Student Borrower or Cosigner for an NCSLT Loan that submitted an Affected Request.
b. “Affected Request” means a Request for SCRA Benefits. c. “Consumer Reporting Agency” or “CRA” means the definition set forth in 15 U.S.C. § 1681a(f). d. “Co-signer” means an obligor on an NCSLT Loan other than a Student Borrower.
e. “Date Transaction Effective” means the data point in Defendant PHEAA’s system of record reflecting the historical date on which a retroactive transaction or other loan account adjustment should have taken effect. f. “Defendant PHEAA” means Pennsylvania Higher Education Assistance Agency, d/b/a American Education Services, and its successors and assigns.
g. “Effective Date” means October 1, 2024. h. “Exception Request” means any request by a Student Borrower or Co-signer made before the Effective Date that, at the time of the request, Defendant PHEAA lacked the authority to decide under the Servicing Guidelines, asserted Case 1:24-cv-00756-JPW Document 72 Filed 12/08/25 Page 3 of 12
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it lacked the authority to decide under the Servicing Guidelines, or sent to another entity for decision, as provisionally identified by Defendants on October 31, 2024. i. “NCSLT Defendants” means (1) The National Collegiate Master Student Loan Trust I, (2) The National Collegiate Student Loan Trust 2003-1, (3) The National Collegiate Student Loan Trust 2004-1, (4) The National Collegiate Student Loan Trust 2004-2, (5) The National Collegiate Student Loan Trust 2005-1, (6) The National Collegiate Student Loan Trust 2005-2, (7) The National Collegiate Student Loan Trust 2005-3, (8) The National Collegiate Student Loan Trust 2006-1, (9) The National Collegiate Student Loan Trust 2006-2, (10) The National Collegiate Student Loan Trust 2006-3, (11) The National Collegiate Student Loan Trust 2006-4, (12) The National Collegiate Student Loan Trust 2007-1, (13) The National Collegiate Student Loan Trust 2007-2, (14) The National Collegiate Student Loan Trust 2007-3, (15) The National Collegiate Student Loan Trust 2007-4, collectively or individually, and their respective successors and assigns. j. “NCSLT Loan” means any private student loan that is or was owned, held by, or securitized by the NCSLT Defendants. k. “Period of Military Service” means the definition in the Servicemembers Civil Relief Act, 50 U.S.C. § 3911(2)-(3), 50 U.S.C. § 3937(b)(2), and 50 U.S.C. § 3917(a)-(c). Case 1:24-cv-00756-JPW Document 72 Filed 12/08/25 Page 4 of 12
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l. “Request for SCRA Benefits” means any Exception Request for SCRA Benefits, or a request for SCRA Benefits generated by Defendant PHEAA’s identification of a servicemember’s Period of Military Service through the Defense Manpower Data Center (DMDC), made on or after January 1, 2015, that: i. remains pending;
ii. was not decided within 30 days of the date of the request; or iii. was denied before May 4, 2021. m. “Servicemembers Civil Relief Act Benefits” or “SCRA Benefits” means the 6% interest rate limitation available to servicemembers during the Period of Military Service pursuant to the Servicemembers Civil Relief Act, 50 U.S.C. § 3937(a)(1)(B), or under the Servicing Guidelines, the April 19, 2021 letter to Defendant PHEAA from the Administrator, or Defendant PHEAA’s NCSLT Loan servicing policies, procedures, staff guidance, or alerts. n. “Servicing Guidelines” means the Servicing Guidelines for TERI Loan Programs Serviced at Pennsylvania Higher Education Assistance Agency (d/b/a American Education Services), attached as Exhibit B to the September 28, 2006 Amended and Restated Private Student Loan Servicing Agreement Between Pennsylvania Higher Education Assistance Agency and The First Marblehead Corporation, Case 1:24-cv-00756-JPW Document 72 Filed 12/08/25 Page 5 of 12
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and all subsequent amendments thereto, including but not limited to letter-amendments which are commonly referred to as “Read and Agreed” letters.
o. “Student Borrower” means the obligor on an NCSLT Loan for whose educational expenses the loan was made. p. “Trust Related Agreements” means all agreements in force as of the date of this Order to which the NCSLT Defendants are a party and that relate to the securitization or servicing of NCSLT Loans.
I.
Review of Affected Requests 6.
Defendant PHEAA must conduct a review of all Affected Requests and provide redress in accordance with the provisions described in paragraphs 7–9. None of the relief should be structured in a manner that necessitates issuing a Form 1099 to an Affected Consumer. Accordingly, Defendant PHEAA shall (and to the extent necessary, the NCSLT Defendants shall ensure, to the fullest extent of NCSLT Defendants’ rights under the Trust Related Agreements, that the relevant servicing, special servicing, or sub-servicing entity is directed to) not issue a Form 1099-C or otherwise report cancellation of debt income with respect to Affected Consumers. Nothing in this paragraph shall preclude Defendant PHEAA or the special subservicer from issuing any Affected Consumer a Form 1099-C in the event and to the extent an Affected Consumer experiences any form Case 1:24-cv-00756-JPW Document 72 Filed 12/08/25 Page 6 of 12
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of debt relief or cancellation during the life of their loan which is unaffiliated with the relief contemplated under this Order. Requests for Servicemembers Civil Relief Act (SCRA) Benefits 7.
To the extent not already completed, for Requests for SCRA Benefits on NCSLT Loans that are performing as of the Effective Date, and were eligible for SCRA Benefits as of the date of the request (which encompasses retroactive eligibility as per 50 U.S.C. § 3937(b)), Defendant PHEAA shall (and to the extent necessary, NCSLT Defendants shall ensure, to the fullest extent of their rights under the Trust Related Agreements, the relevant servicing, special servicing, or sub-servicing entity is directed to): a. retroactively apply a 6% interest rate limitation during the Student Borrower or Co-signer’s Period of Military Service and reimburse any overpayments to the Student Borrower by applying a credit to the Student Borrower or Co-signer’s account. Interest includes service charges, renewal charges, fees, or any other charges (except bona fide insurance) with respect to an obligation or liability, 50 U.S.C. § 3937(d)(1); b. submit corrections to all CRAs to whom Defendant PHEAA furnished credit reporting information as to the Student Borrower or Co-signer to correct all fields that were furnished incorrectly as a result of incorrectly determining the payment amount or any delinquency based on an application to the account of an interest rate greater than a 6% interest rate; and Case 1:24-cv-00756-JPW Document 72 Filed 12/08/25 Page 7 of 12
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c. waive or reapply as a credit to the consumer’s account any late fees assessed during the Student Borrower or Co-signer’s Period of Military Service, and ensure any such waiver or credit of fees paid is applied with the Date Transaction Effective as the date that the fee was originally assessed. 8.
To the extent not already completed, for Requests for SCRA Benefits on NCSLT Loans that have been charged-off as of the Effective Date, were eligible for SCRA Benefits as of the date of the request (which encompasses retroactive eligibility as per 50 U.S.C. § 3937(b)), and had an interest rate above 6% at any time during the Student Borrower or Cosigner’s Period of Military Service, Defendant PHEAA shall (and to the extent necessary, NCSLT Defendants shall ensure, to the fullest extent of their rights under the Trust Related Agreements, the relevant servicing, special servicing, or sub-servicing entity is directed to): a. retroactively apply a 6% interest rate limitation during the Student Borrower or Co-signer’s Period of Military Service and reimburse any overpayments to the Student Borrower by applying a credit to the Student Borrower or Co-signer’s account. Interest includes service charges, renewal charges, fees, or any other charges (except bona fide insurance) with respect to an obligation or liability, 50 U.S.C. § 3937(d)(1); b. submit corrections to all CRAs to whom Defendant PHEAA furnished credit reporting information as to the Student Borrower or Co-signer to correct all fields that were furnished incorrectly as a result of incorrectly determining Case 1:24-cv-00756-JPW Document 72 Filed 12/08/25 Page 8 of 12
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the payment amount or any delinquency based on an application to the account of an interest rate greater than a 6% interest rate; and c. waive or reapply as a credit to the consumer’s account (or, if there is no longer a balance on the account, issue a refund of) any late fees charged during the Student Borrower or Cosigner’s Period of Military Service.
9.
To the extent not already completed, for Requests for SCRA Benefits on NCSLT Loans that have been paid in full as of the Effective Date, and were eligible for SCRA Benefits as of the date of the request (which encompasses retroactive eligibility as per 50 U.S.C. § 3937(b)), Defendant PHEAA shall (and to the extent necessary, NCSLT Defendants shall ensure, to the fullest extent of their rights under the Trust Related Agreements, the relevant servicing, special servicing, or sub-servicing entity is directed to):
a. retroactively apply a 6% interest rate limitation during the Student Borrower or Co-signer’s Period of Military Service, and reimburse any overpayments to the Student Borrower. Interest includes service charges, renewal charges, fees, or any other charges (except bona fide insurance) with respect to an obligation or liability, 50 U.S.C. § 3937(d)(1); b. submit corrections to all CRAs to whom Defendant PHEAA furnished credit reporting information as to the Student Borrower or Co-signer to correct all fields that were furnished incorrectly as a result of incorrectly determining Case 1:24-cv-00756-JPW Document 72 Filed 12/08/25 Page 9 of 12
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the payment amount or any delinquency based on an application to the account of an interest rate greater than a 6% interest rate; and c. waive or reapply as a credit to the consumer’s account (or, if there is no longer a balance on the account, issue a refund of) any late fees assessed during the Student Borrower or Cosigner’s Period of Military Service, and ensure any such waiver or credit of fees paid is applied with the Date Transaction Effective as the date that the fee was originally assessed.
II.
Civil Money Penalties IT IS FURTHER ACKNOWLEDGED that:
10.
Under § 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint, NCSLT Defendants, collectively, have paid a civil money penalty of $400,000 to the Bureau, and Defendant PHEAA has paid a civil money penalty of $1,750,000 to the Bureau.
11.
The civil money penalties paid under this Order have been deposited in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).
Case 1:24-cv-00756-JPW Document 72 Filed 12/08/25 Page 10 of 12
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III.
Release 12.
The Bureau releases and discharges Defendants from all potential liability for law violations that the Bureau has or might have asserted based on the allegations of the Complaint, to the extent such conduct occurred before the Effective Date and the Bureau knows about such conduct as of the Effective Date. The Bureau may use the practices described in the 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 the Bureau to determine and ensure compliance with this Order, or to seek penalties for any violations of this Order.
IV.
Service 13.
This Order may be served upon the Defendants by electronic mail, certified mail, or United Parcel Service, either by the United States Marshal, the Clerk of the Court, or any representative or agent of the Bureau.
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IT IS SO ORDERED.
DATED this 8th day of December, 2025. s/ Jennifer P. Wilson JENNIFER P. WILSON United States District Judge Middle District of Pennsylvania Case 1:24-cv-00756-JPW Document 72 Filed 12/08/25 Page 12 of 12
Stipulation ()
PDF of this document (3 pages)
Page 178
IN THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
JOINT STIPULATION OF DISMISSAL In light of the District Court’s entry of the parties’ Proposed Modified Stipulated Final Judgment and Order on December 8, 2025, 1:24-cv-00756-JPW, Dkt. No. 72, the parties hereby jointly stipulate to dismissal of the above-captioned appeal with prejudice pursuant to Federal Rule of Appellate Procedure 42(b)(1). The parties shall each bear their own costs. No court fees are due. Dated: January 6, 2026 CONSUMER FINANCIAL PROTECTION BUREAU, v.
PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY, et al.,
No. 24-3061
(M.D. Pa. No. 1:24-cv-00756-JPW)
Mark Paoletta Chief Legal Officer Victoria Dorfman Senior Legal Advisor Christopher Deal Deputy General Counsel
/s/ Joseph Frisone
Joseph Frisone [email protected] 202-435-9287 CONSUMER FINANCIAL PROTECTION BUREAU 1700 G Street NW /s/ Rachel Rodman
Rachel Rodman [email protected] 202-637-6281 WHITE & CASE 701 13th Street NW Washington, DC 20005
Attorney for Appellant Pacific Investment Management Co LLC
/s/ Thomas M. Oates
Thomas M. Oates [email protected] Case: 24-3061 Document: 28 Page: 1 Date Filed: 01/06/2026
Page 179
Washington, DC 20552
Attorneys for Appellee Consumer Financial Protection Bureau
/s/ James J. Jarecki
James J. Jarecki [email protected] 717-720-1568 PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY 1200 N 7th Street, 4th Floor Harrisburg, PA 17102
Attorney for Appellee Pennsylvania Higher Education Assistance Agency 212-295-6543 WILMER CUTLER PICKERING HALE & DORR 7 World Trade Center 250 Greenwich Street New York, NY 10007
Attorney for Appellees 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, and National Collegiate Student Loan Trust 2007-4
Case: 24-3061 Document: 28 Page: 2 Date Filed: 01/06/2026
Page 180
CERTIFICATE OF SERVICE I hereby certify that on January 6, 2026, the foregoing Joint Stipulation of Dismissal was filed electronically and served on all counsel of record through the Third Circuit Court of Appeals Electronic Case Filing (CM/ECF) system. /s/ Thomas M. Oates
Thomas M. Oates Case: 24-3061 Document: 28 Page: 3 Date Filed: 01/06/2026
Dismissal ()
PDF of this document (1 pages)
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UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
No. 24-3061
Consumer Financial Protection Bureau v. PHEAA, et al
(U.S. District Court No.: 1:24-cv-00756)
ORDER It is hereby ORDERED that the above matter is dismissed pursuant to Fed. R. App. P. 42(b). A certified copy of this order is issued in lieu of a formal mandate.
For the Court,
s/ Patricia S. Dodszuweit Clerk
Dated: January 07, 2026 LMR/cc: Joseph Frisone, Esq.
James J. Jarecki, Esq.
Thomas M. Oates, Esq.
Rachel Rodman, Esq.
Mr. Peter J. Welsh,
Case: 24-3061 Document: 29 Page: 1 Date Filed: 01/07/2026 A True Copy:
Patricia S. Dodszuweit, Clerk Certified Order Issued in Lieu of Mandate