As Paperwork Goes Missing, Private Student Loan Debts May Be Wiped Away

Tens of thousands of people who took out private loans to pay for college but have not been able to keep up payments may get their debts wiped away because critical paperwork is missing.

The troubled loans, which total at least $5 billion, are at the center of a protracted legal dispute between the student borrowers and a group of creditors who have aggressively pursued them in court after they fell behind on payments.

Judges have already dismissed dozens of lawsuits against former students, essentially wiping out their debt, because documents proving who owns the loans are missing. A review of court records by The New York Times shows that many other collection cases are deeply flawed, with incomplete ownership records and mass-produced documentation.

Some of the problems playing out now in the $108 billion private student loan market are reminiscent of those that arose from the subprime mortgage crisis a decade ago, when billions of dollars in subprime mortgage loans were ruled uncollectible by courts because of missing or fake documentation. And like those troubled mortgages, private student loans — which come with higher interest rates and fewer consumer protections than federal loans — are often targeted at the most vulnerable borrowers, like those attending for-profit schools.

At the center of the storm is one of the nation’s largest owners of private student loans, the National Collegiate Student Loan Trusts. It is struggling to prove in court that it has the legal paperwork showing ownership of its loans, which were originally made by banks and then sold to investors. National Collegiate’s lawyers warned in a recent legal filing, “As news of the servicing issues and the trusts’ inability to produce the documents needed to foreclose on loans spreads, the likelihood of more defaults rises.”

The Path of a Student Loan

When a student takes out a private loan, that is only the first step in a complicated process. LOAN ORIGINATORS

Students borrow money from the loan originators, mainly big banks and other institutions.

Banks bundle multiple loans and sell them to a depositor (in this case, National Collegiate Funding LLC).

LOANS DEPOSITOR National Collegiate Funding The depositor in turn sells the loans to various trusts, like the National Collegiate Student Loan Trust.

LOANS PAYMENTS. The trusts employ a student loan servicer — in this case, American Education Services. Borrowers send their monthly payments to the servicer, which then sends money back to the trusts.

MULTIPLE TRUSTS National Collegiate Student Loan Trust SERVICER American Education Services IF STUDENTS DEFAULT American Education Services turns to U.S. Bank, based in Minneapolis, to collect on the debt.

SERVICER OF OVERDUE LOANS LAWSUITS  U.S. Bank U.S. Bank subcontracts the debt collection work to Transworld Systems, among other companies.

DEBT COLLECTION COMPANY NETWORK OF DEBT COLLECTION LAW FIRMS Transworld Systems Transworld turns to its network of debt collection law firms, which may initiate lawsuits against delinquent borrowers.

HOW IT WORKS

Last year, National Collegiate unleashed a fusillade of litigation against Samantha Watson, a 33-year-old mother of three who graduated from Lehman College in the Bronx in 2013 with a degree in psychology.

Ms. Watson, the first in her family to go to college, took out private loans to finance her studies. But she said she had trouble following the fine print. “I didn’t really understand about things like interest rates,” she said. “Everybody tells you to go to college, get an education, and everything will be O.K. So that’s what I did.”

Ms. Watson made some payments on her loans but fell behind when her daughter got sick and she had to quit her job as an executive assistant. She now works as a nurse’s aide, with more flexible hours but a smaller paycheck that barely covers her family’s expenses.

When National Collegiate sued her, the paperwork it submitted was a mess, according to her lawyer, Kevin Thomas of the New York Legal Assistance Group. At one point, National Collegiate presented documents saying that Ms. Watson had enrolled at a school she never attended, Mr. Thomas said.

“I tried to be honest,” Ms. Watson said of her court appearance. “I said, ‘Some of these loans I took out, and I’ll be responsible for them, but some I didn’t take.’”

In her defense, Ms. Watson’s lawyer seized upon what he saw as the flaws in National Collegiate’s paperwork. Judge Eddie McShan of New York City’s Civil Court in the Bronx agreed and dismissed four lawsuits against Ms. Watson. The trusts “failed to establish the chain of title” on Ms. Watson’s loans, he wrote in one ruling.

When the judge’s rulings wiped out $31,000 in debt, “it was such a relief,” Ms. Watson said. “You just feel this whole weight lifted. My mom started to cry.”

Joel Leiderman, a lawyer at Forster and Garbus, the law firm that represented National Collegiate in its litigation against Ms. Watson, declined to comment on the lawsuits.

Lawsuits Tossed Out

Judges throughout the country, including recently in cases in New HampshireOhio and Texas, have tossed out lawsuits by National Collegiate, ruling that it did not prove it owned the debt on which it was trying to collect.

The trusts win many of the lawsuits they file automatically, because borrowers often do not show up to fight. Those court victories, which can be used to garnish paychecks and take federal benefits like Social Securityfrom bank accounts, can haunt borrowers for decades.

The loans that National Collegiate holds were made to college students more than a decade ago by dozens of different banks, then bundled together by a financing company and sold to investors through a process known as securitization. These private loans were not guaranteed by the federal government, which is the nation’s largest student loan lender.

But as the debt passed through many hands before landing in National Collegiate’s trusts, critical paperwork documenting the loans’ ownership disappeared, according to documents that have surfaced in a little-noticed legal battle involving the trusts in state and federal courts in Delaware and Pennsylvania.

National Collegiate’s legal problems have hinged on its inability to prove it owns the student loans, not on any falsification of documents.

Robyn Smith, a lawyer with the National Consumer Law Center, a nonprofit advocacy group, has seen shoddy and inaccurate paperwork in dozens of cases involving private student loans from a variety of lenders and debt buyers, which she detailed in a 2014 report.

Document: National Collegiate’s Audit of P.H.E.A.A.

But National Collegiate’s problems are especially acute, she said. Over and over, she said, the company drops lawsuits — often on the eve of a trial or deposition — when borrowers contest them. “I question whether they actually possess the documents necessary to show that they own loans,” Ms. Smith said.

In an unusual situation, one of the financiers behind National Collegiate’s trusts agrees with some of the criticism. He is Donald Uderitz, the founder of Vantage Capital Group, a private equity firm in Delray Beach, Fla., that is the beneficial owner of National Collegiate’s trusts. (Mr. Uderitz’s company keeps whatever money is left after the trusts’ noteholders are paid off.)

He said he was appalled by National Collegiate’s collection lawsuits and wanted them to stop, but an internal struggle between Vantage Capital and others involved in operating the trusts has prevented him from ordering a halt, he said

“We don’t like what’s going on,” Mr. Uderitz said in a recent interview.

“We don’t want National Collegiate to be the poster boy of bad practices in student loan collections, but we have no ability to affect it except through this litigation,” he said, referring to a lawsuit that he initiated last year against the trusts’ loan servicer in Delaware’s Chancery Court, a popular battleground for corporate legal fights.

Ballooning Balances

Like those who took on subprime mortgages, many people with private student loans end up shouldering debt that they never earn enough to repay. Borrowing to finance higher education is an economic decision that often pays off, but federal student loans — a much larger market, totaling $1.3 trillion — are directly funded by the government and come with consumer protections like income-based repayment options.

Private loans lack that flexibility, and they often carry interest rates that can reach double digits. Because of those steep rates, the size of the loans can quickly balloon, leaving borrowers to pay hundreds and, in some cases, thousands of dollars each month.

Others are left with debt for degrees they never completed, because the for-profit colleges they enrolled in closed amid allegations of fraud. Federal student borrowers can apply for a discharge in those circumstances, but private borrowers cannot.

Other large student lenders, like Sallie Mae, also pursue delinquent borrowers in court, but National Collegiate stands apart for its size and aggressiveness, borrowers’ lawyers say.

Lawsuits against borrowers who have fallen behind on their consumer loans are typically filed in state or local courts, where records are often hard to search. This means that there is no national tally of just how often National Collegiate’s trusts have gone to court.

Very few cases ever make it to trial, according to court records and borrowers’ lawyers. Once borrowers are sued, most either choose to settle or ignore the summons, which allows the trusts to obtain a default judgment.

“It’s a numbers game,” said Richard D. Gaudreau, a lawyer in New Hampshire who has defended against several National Collegiate lawsuits. “My experience is they try to bully you at first, and then if you’re not susceptible to that, they back off, because they don’t really want to litigate these cases.”

Transworld Systems, a debt collector, brings most of the lawsuits for National Collegiate against delinquent borrowers. And in legal filings, it is usually a Transworld representative who swears to the accuracy of the records backing up the loan. Transworld did not respond to a request for comment.

Hundreds of cases have been dismissed when borrowers challenge them, according to lawyers, often because the trusts do not produce the paperwork needed to proceed.

‘We Need Answers’

Jason Mason, 35, was sued over $11,243 in student loans he took out to finance his freshman year at California State University, Dominguez Hills. His lawyer, Joe Villaseñor of the Legal Aid Society of San Diego, got the case dismissed in 2013, after the trust’s representative did not show up for a court-ordered deposition. It is unclear if the trusts had the paperwork they would have needed to prove their case, Mr. Villaseñor said.

“It was a scary time,” Mr. Mason said of being taken to court. “I didn’t know how they would come after me, or seize whatever I had, to get the money.”

Nancy Thompson, a lawyer in Des Moines, represented students in at least 30 cases brought by National Collegiate in the past few years. All were dismissed before trial except three. Of those, Ms. Thompson won two and lost one, according to her records. In every case, the paperwork Transworld submitted to the court had critical omissions or flaws, she said.

National Collegiate’s beneficial owner, Mr. Uderitz, hired a contractor in 2015 to audit the servicing company that bills National Collegiate’s borrowers each month and is supposed to maintain custody of many loan documents critical for collection cases.

A random sample of nearly 400 National Collegiate loans found not a single one had assignment paperwork documenting the chain of ownership, according to a report they had prepared.

While Mr. Uderitz wants to collect money from students behind on their bills, he says he wants the lawsuits against borrowers to stop, at least until he can get more information about the documentation that underpins the loans.

“It’s fraud to try to collect on loans that you don’t own,” Mr. Uderitz said. “We want no part of that. If it’s a loan we’re owed fairly, we want to collect. We need answers on this.”

Keith New, a spokesman for the servicer, the Pennsylvania Higher Education Assistance Agency (known to borrowers as American Education Services), said, “We believe that the auditors were misinformed about the scope of P.H.E.A.A.’s contractual obligations. We are confident that the litigation will reveal that the agency has acted properly and in accordance with its agreements.”

The legal wrangling — now playing out in three separate court cases in Pennsylvania and Delaware — has dragged on for more than a year, with no imminent resolution in sight. Borrowers are caught in the turmoil. Thousands of them are unable to get answers about critical aspects of their loans because none of the parties involved can agree on who has the authority to make decisions. Some 2,000 borrower requests for forbearance and other help have gone unanswered, according to a court filing late last year.

Correction: July 18, 2017 
An earlier version of this article referred imprecisely to how debt collectors may garnish federal benefits like Social Security from borrowers. The collectors can in some circumstances take benefits after they are deposited in a bank account; they cannot garnish the benefits directly.

Original Post by new york times  https://www.nytimes.com/2017/07/17/business/dealbook/student-loan-debt-collection.html?em_pos=large&emc=edit_dk_20170717&nl=dealbook&nlid=66184561&ref=headline&te=1

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California Supreme Court Moves to Make Bar Exam Easier to Pass

California Supreme Court Moves to Make Bar Exam Easier to Pass

With passage rates for the test sagging, the court has asserted its authority over the exams, traditionally among the toughest in the country.

California has long had a reputation for having one of the most difficult bar exams in the country. Now, with passage rates sagging, the state will make it easier to pass the test, which is required to be licensed as a practicing lawyer.

The California Supreme Court, the ultimate authority over the bar exam, has decided to change the way the certification score is set. The court has not yet decided where the threshold will be set, but the changes will take effect in January.

The move follows a sometimes furious debate in California legal circles over whether the state’s passing score, or “cut score” — 144 — was unrealistic.

Each state offers its own bar exam, but many are moving toward more uniform exams, especially in the multiple-choice portion. What differentiates states is where they set the line for passage. For years, California had set the threshold for passing the exam higher than any other state but Delaware.

Last year, just 62 percent of first-time test takers passed the California bar exam, compared with 83 percent in New York.

And only 51 percent of the graduates of the University of California Hastings College of the Law passed the state’s exam in July 2016. That result, the school’s dean, David L. Faigman, wrote the California Committee of Bar Examiners last December, was “outrageous and constitutes unconscionable conduct on the part of a trade association that masquerades as a state agency.”

“The cut score is almost everything,” said Robert Anderson, a professor of corporate law at Pepperdine School of Law in California, who did a study of the 10 most difficult state exams in 2013. That study concluded that “California’s is probably the most difficult” in the country.

“If California changed its minimum score to 133, which is the same as New York’s, then I would say, California’s is easy,” he added. (Delaware’s passing score is 145.)

Proponents for keeping the score argue that state bars have an ethical obligation to protect citizens from ill-prepared lawyers.

But deans of law schools, which have been buffeted by declining enrollments, say setting the bar licensure standard so high serves only to shield the profession by keeping out large numbers of qualified lawyers.

In February, 20 deans at American Bar Association-accredited California law schools wrote the state Supreme Court asking it to set a lower passing score. A state legislative hearing considered the issue, and a study was set in motion. The state Supreme Court soon stepped in to assert its authority over the exam. In amendments adopted on June 21 but released this week, the court said that it “must set the passing score of the examination.”

Cathal Conneely, a spokesman for the court, said on Thursday that the justices would decide on the cut score after they received and considered the bar examiner committee report.

Although no date was set, the justices could make that decision in September and apply the new score retroactively for those taking the California bar examination this month, according to a Twitter post on Tuesday by Joanna Mendoza, a trustee of the State Bar of California.

Some, including Fleming’s Fundamentals of Law, a California bar exam preparation business that tracks the debate over the certification score, called the court’s change “unprecedented.”

Nicholas W. Allard, dean of Brooklyn Law School, hailed the action as an effort “to take back control of licensing and admitting new lawyers.”

The move “signals that much larger concerns are at work that will force eventually an overhaul everywhere of legal testing and licensing practices,” he said.

“Traditional bar exam and licensing practices have outlived their sell-by date and are increasingly hard, if not impossible, to justify as serving the best interests of the profession or the public.”

One flash point in the debate over the California exam was an announcement in April that Whittier Law School, a half-century old and accredited by the American Bar Association, would close.

Bar passage rates at Whittier, long an avenue for disadvantaged students to become lawyers, had plunged in recent years. Its passage rate hovered in the routine statewide range, about 68 percent a few years ago, but fell to 22 percent on the July 2016 bar.

Some critics complained that a number of Whittier graduates had scores high enough that they would have passed nearly every other state’s bar.

The California Supreme Court also said that it would appoint a majority of the 19-member bar examiners committee, which has been criticized for including nonlawyers and political appointees.

The California court’s move to assert its authority over the exam was hailed by some legal professionals.

“I see this development as bringing the role of the California court in bar admissions into the mainstream,” said Erica Moeser, president of the National Conference of Bar Examiners, a nonprofit in Madison, Wis., that constructs and scores the professional entrance exam.

“Virtually all state supreme courts exercise their inherent authority to regulate the admission of lawyers more closely than has appeared to be the case in California,” she said.

Correction: July 15, 2017 
Because of an editing error, an article on Friday about efforts by California to make its bar exam easier to pass referred incorrectly in some editions to the public information officer for the California Supreme Court. The officer, Cathal Conneely, is a man.

Orginal Post on the new york times website listed below.
https://www.nytimes.com/2017/07/13/business/dealbook/california-bar-exam.html?mwrsm=Email

 

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Phone Scammers Target Bankruptcy Filers

Hemb Law Group was informed by United States court by their judiciary news letter. We are informing all Hemb Law Group clients and potential clients to be aware of this latest scam.

Scam Targets Bankruptcy Filers

Phone scammers are targeting bankruptcy filers in several states, using personal information from filings and posing as attorneys to get intended victims to immediately wire money to satisfy a debt.

The National Association of Consumer Bankruptcy Attorneys issued a warning that “Under no circumstances would a bankruptcy attorney or staff member telephone a client and ask for a wire transfer immediately to satisfy a debt. Nor would the bankruptcy attorney and staff ever threaten arrest if a debt isn’t paid.”

Bankruptcy filers in Vermont and Virginia reportedly have received calls. Vermont’s Attorney General says scammers use software to “spoof” the Caller ID system so the call appears to be originating from the phone line of the consumer’s bankruptcy attorney. Typically the calls come late in the evening or during non-business hours to make it difficult for intended victims to verify the call by contacting their attorney.

Consumers receiving this kind of call are advised to hang up and contact their bankruptcy attorney as soon as possible. Do not give any personal or financial account information to the caller.

http://www.uscourts.gov/news/2015/10/20/scam-targets-bankruptcy-filers

Reference

“Scam Targets Bankruptcy Filers.” United States Courts. N.p., 20 Oct. 2015. Web. 21 Oct. 2015.

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Three reasons why you should use a parenting time expeditor

If you are experiencing difficulties with your ex over parenting time, and you have an existing order, it can be very frustrating to deal with delays or violations. You may want to call your attorney and demand action (as you should), but getting immediate remedies may not be so easy. After all, getting into court could take weeks. So what are you to do in the meantime?

If your custody order calls for contacting a parenting time expeditor before going back to court, you may be in luck. An expeditor (sometimes called a parenting time coordinator) is a neutral third party who helps parents resolve disputes. The expeditor may also arbitrate parenting time complaints.

There are a number of benefits to having a parenting time expeditor, including:

Faster decisions – There’s a reason why they are called “expeditors.” It is easier to schedule a meeting  with an expeditor and they can provide decisions faster than scheduling a motion date before a judge.

Cheaper process – Unlike going to court, you don’t have to file a motion to have your dispute handled by a parenting time expeditor.

Clarity in the order – An expeditor may also help you understand unclear provisions of the order. Keep in mind that this is not legal advice, but it may help in avoiding additional parenting time disputes.

If your current order does not call for an expeditor or some type of mediation process before filing another motion, chances are that this is an opportunity to have your decree modified to include it.

The preceding is not legal advice.  

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What to consider with Halloween parenting time disputes

With Halloween coming on Friday, some of our readers may be experiencing difficulty with deciding where their child will go Trick-or-Treating. In some instances, parenting time disputes may become vindictive in that a parent may not even want a child to take part in this annual event.

With parenting time disputes, there are a number of ways to reach an accord where parents do not feel as if they are being slighted. It is not uncommon for the child to go on two Trick-or-Treating adventures. Perhaps one parent can take them to a mall where they offer it on a day before Halloween, with the other parent taking the child through their neighborhood. Parents could even agree that on alternating years, this arrangement would be reversed.

After all, what kid wouldn’t want to go out and get candy twice? If the child feels special, that’s what ultimately matters.

However, we would be naïve if we did not acknowledge that some parents do not want their kids going Trick-or-Treating because of their religious beliefs, and because they are trying to educate the kids on how their religion works. Not only is this type of dispute difficult to resolve because of how passionate a parent can be about his or her religious beliefs, it is hard because a court may not be so willing to address a parenting time dispute because of one parent’s religious beliefs.  

Because of this, it is important for warring parents to be open to flexibility regarding events directed towards a child’s happiness. 

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