CFPB’s $21.6 Million Settlement Concerning Student Loan Servicing and Debt Collection in Doubt

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As Enforcement Watch reported in late September, the Consumer Financial Protection Bureau (“CFPB”) announced that it had filed a proposed consent judgment in the United States District Court for Delaware to resolve claims relating to the servicing and debt collection activities on a portfolio of about 800,000 student loans.  Under the proposed settlement agreement, the student loan trusts and a servicer agreed to pay approximately $21.6 million in consumer restitution, disgorgement​, and civil money penalties, and consented to significant restrictions on the trusts’ ability to collect on loans going forward.

​That settlement agreement has since been challenged ​by the owner trustee, certain investors, and other servicers of the $12 billion in student loans at issue. Those parties have all moved to intervene.  ​Notably, the intervenors allege that the parties who negotiated the consent order on behalf of the trusts lacked authority to do so.

On October 5, the Court granted the CFPB an extension to respond to the various motions to intervene, setting a ​deadline of October 19.  The intervening parties will file reply briefs due November 6.  Enforcement Watch will continue to monitor this dispute and its impact on the CFPB’s purported settlement.​​

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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