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NY AG finds student loan company misled borrowers

Sep 15, 2020 3:30 pm
Amanda Fries is reporting for the Times Union the state attorney general's office has reached an agreement with student debt collection firm Transworld Systems Inc. that will result in the dismissal of thousands of lawsuits the company brought against student borrowers. The office of Attorney General Letitia James found that Transworld violated multiple federal and state consumer protection laws by making "false, misleading and deceptive statements" in its collegiate student loan lawsuits and in communications with borrowers. As part of the settlement agreement, Transworld must make changes to its debt collection process and pay $600,000, which will be paid out as restitution to borrowers and as penalties to the state, according to a September 14 news release from the AG's office. Loans held by the National Collegiate Student Loan Trusts have defaulted at unprecedented rates for various reasons, James said. She said Transworld developed and implemented an aggressive strategy to rely heavily on litigation to collect defaulted debts, which rapidly moved to judgment, impeding the borrowers’ ability to mount a defense. Transworld has agreed to discontinue the use of misleading language to borrowers and to dismiss all wrongfully filed lawsuits against borrowers where the statute of limitations has expired; enhancing training for the company's staff; and releasing all pending garnishments, levies, liens, restraining notices, or any other judgment as a result of wrongfully filed lawsuits. Read the full story in the Times Union.