Consumer Finance Insights
June 15, 2018

California AG Announces Settlement Agreement with Student Loan Debt Collector

On June 14, 2018, the California Attorney General announced that it had entered into a settlement​ with a company holding nearly 35,000 private student loans across California.  In the complaint, which was filed on June 13, 2018, the Attorney General alleged that the company had engaged in unlawful debt collection practices in connection with these private loans made to students formerly enrolled at a now-defunct college.  The complaint specifically alleged that the company had violated the Unfair Competition Law, Cal. Bus. & Prof. Code, § 17200 et seq., by attempting to collect the unpaid balance of these loans by sending overdue notices to borrowers that threatened legal action if the balance remained unpaid despite significant debt-collection limitations agreed to by the company barring it from threatening borrowers with legal action.

The settlement and stipulated judgment enjoins the loan collection company from all debt collections in connection with these loans and requires the company to discharge the remaining balances on the loans.  The settlement also requires the company to refund all payments made to it since August 1, 2017,​​​ as well as additional payments made prior to August 1, 2017, by Californians who received problematic debt-collection notices.  These refunds total $584,000.  The company is further enjoined from engaging in future debt-collection misconduct and must delete all negative credit reporting associated with these loans.