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Judge Tosses CFPB's Student Loan Debt Collection Lawsuit

  • Written by Steel Rose
A Delaware federal judge has dismissed the U.S. Consumer Financial Protection Bureau's lawsuit alleging trusts that securitized more than 800,000 student loans engaged in deceptive debt collection practices.
U.S. District Judge Maryellen Noreika in Wilmington wrote on Friday that the CFPB had not protected its right to bring the lawsuit during a battle over its constitutional authority. The ruling appears to be the first in which a court has said that ratification by a constitutionally appointed CFPB director could not save one of the agency's lawsuits after the U.S. Supreme Court declared the agency's structure invalid in Seila Law v. CFPB last year.
A representative for the CFPB did not immediately reply to a request for comment on Friday afternoon.
The CFPB had sued the group of trusts known as the National Collegiate Student Loan Trusts in 2017, alleging it had violated the law through lawsuits seeking to collect debts that were unverified or too old. The tactics violated the Consumer Financial Protection Act, the agency alleged.
The trusts' debt collector, Transworld Systems Inc, and an insurer for some of the trusts, Ambac Assurance Corporation intervened in the case soon after, and moved to dismiss it on several grounds last year, while a dispute over who had authority to represent the trusts played out.
Allyson Baker of Venable, who represents Transworld, did not immediately reply to a request for comment on Friday. To read more click here