The Attorney General of New York has reached a settlement with Transworld Systems which will see the collector pay $600,000 in restitution to affected individuals and make changes to how it collects on student loans.
A copy of the settlement agreement can be accessed by clicking here. The allegations centered on collection practices between November 2014 and April 2016.
Among the allegations made against Transworld were:
- Filed complaints that falsely identified the National Collegiate Student Loan Trusts as the borrower’s “original creditor” when, in fact, the National Collegiate Student Loan Trusts are assignees of the original creditors
- Filed sworn affidavits in support of default judgment motions attaching documents Transworld identified as “redacted” versions of original documents when, in fact, they were documents Transworld created for the purpose of litigation
- Filed sworn affidavits in support of default judgment motions in which Transworld staff asserted that they had personal knowledge of certain business records when, in fact, they lacked such knowledge
- Filed sworn affidavits in support of default judgment motions that stated that a particular student loan was transferred to particular National Collegiate Student Loan Trusts when, in fact, the documents submitted to support this assertion failed to conclusively demonstrate a link between the loan at issue and the National Collegiate Student Loan Trusts
- Filed complaints representing that a borrower applied for a loan from a “servicing agent” when, in fact, the borrower never dealt with such an entity
- Filed National Collegiate Student Loan Trusts lawsuits outside of the three-year statute of limitations applicable to such lawsuits in New York
- Threatened legal action against borrowers even though the National Collegiate Student Loan Trusts could not or would not sue because the statute of limitations for suing on the debt had expired
As part of the settlement, Transworld has agreed to:
- Cease identifying the National Collegiate Student Loan Trusts as “original creditors,” stop identifying documents prepared for litigation as “redacted,” end the obfuscating of entities involved in originating National Collegiate Student Loan Trusts loans, and discontinue the use of misleading language in communications with borrowers by implying that they cannot sue due to the expiration of the statute of limitations
- Enhance training for Transworld staff to ensure accuracy of statements concerning personal knowledge and chain-of-title
- No longer file National Collegiate Student Loan Trusts lawsuits beyond the three-year statute of limitations applicable to such lawsuits in New York
- Voluntarily dismiss all lawsuits — which should have never been filed because of the expired statute of limitations — that were filed between Jan. 1, 2018 and the date of the settlement
- Voluntarily release all pending garnishments, levies, liens, restraining notices, attachments, or any other judgment enforcement mechanism obtained as a result of judgments obtained in wrongfully-filed lawsuits where the statute of limitations have expired
- Take steps to vacate any judgment obtained in an wrongfully-filed lawsuit where the statute of limitations have expired (provided the relevant parties, including the National Collegiate Student Loan Trusts, consent to the suit being vacated)
- Pay $600,000 in penalties to the state and/or restitution to certain New York borrowers
“Today, my office is holding Transworld accountable for the unlawful and manipulative student loan debt collection practices that affected thousands of New Yorkers,” said Letitia James, the Attorney General of New York, in a statement. “For years, Transworld used fraud and deception to pursue defaulted borrowers and obtain default judgments on a massive scale. Our investigation not only is putting hundreds of thousands of dollars back into the pockets of student borrowers, but brought about concrete changes by Transworld, which is now finally providing consumers struggling with defaulted student loan debt all the protections required by law.”
In a statement, Transworld said the conduct alleged by the Attorney General was related to one portfolio of student loans within the collector’s Attorney Network business unit, which used outside collection law firms to collect on defaulted loans. “The alleged conduct is not a reflection of TSI’s current practices and TSI did not admit to any of the New York Attorney General’s findings or conclusions. The Assurance enables TSI to focus on providing superior service to its clients and consumers and resolves a legacy distraction,” the company said in its statement.