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Discussion in 'Credit Talk' started by steve, Jun 1, 2000.
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While I don't know how much creedence to put into it, I heard so much of the same story when I worked for a Trans Union affiliate. Although I'm in Texas, I'm sure the practice is common.
I don't recall the name of the fed-subsidized company, but it was one that bought guaranteed student loans from local banks. Apparently, their practice was to begin billing current students "by accident." Of course, the loan was supposedly not due until several months after the student graduated or stopped attending full-time.
Anyway, the company would promise either to send the student deferrment forms or correct the billing error. Instead, they would continue billing the student, regardless of whether or not he/she continued to demand correction. Eventually, they would place the loan in default and add enormous fees and default charges which usually amounted to over 100% of the principal.
Soon after, the company would sell the amount of the loan, plus all added fees and charges, to the guarantee agency, making a huge profit. It was then out of their hands, and the student was responsible for paying back the huge amount either voluntarily or involuntarily with no recourse. Within a set amount of time, the state guarantee agency would take the loan to a state judge who would authorize aggressive collection measures, further legalizing the screwing the student has taken. Regardless of how crooked the practice was, the only way the student could get out of paying back the loan was to prove he/she didn't actually receive the loan. Anything else was irrelevant.
As I mentioned before, I'm not sure how true all this is, but I heard the same story a LOT. While all we could do was advise consumers to dispute information on their credit reports, these people told many horror stories, and I'm sure more than quite a few of them were true.
That sounds horrible! Where were these loans from? I have student loans that I take out every year, God knows I can't afford to have this happen to me!!!!
If I'm not mistaken, it was SALLIEMAE who bought the loans from various local banks. If there were any more companies involved in this practice, I don't recall them.
I think all the loans were guaranteed by the Texas Guaranteed Student Loan Corporation. In all the cases, no one could really blame TGSLC because it was their duty to collect on the defaulted loans. SALLIEMAE, on the other hand, was out of the picture once the loans were sold back to the guarantor at ultra-inflated rates.
All my information is second-hand from distraught customers reviewing their Trans Union reports at the Retail Merchants' Association office I worked for. I retired from there in 1995, and I haven't heard anything about it since.
While there was nothing I could do or advise these people to do, other than hire an attorney, I couldn't help but believe them. I heard the same story over and over, and it varied very little. I'm sure such incidents aren't just limited to Texas.
Interesting to note, the company that originally purchased my loan and improperly submitted my loan for default was Sallie Mae. However, Sallie Mae, to my knowledge did not gain a commission or fee when the loan was purchased by the guarantor. Still, it seems that all these companies, the guarantor, the servicer, collection agency, parent company are connected through related holding company network. So, indirectly, the whole network benefits. In my case, the guarantor is owned by a corporation that the guarantor sold the loans to when they were reconsolidated. The guarantor later tried to collect an extra 1/3rd fee beyond the 25% original fee already collected. Also, the collection agency tried to collect a 33% fee instead of the 25% fee provided for in the promissory note. Do you have any written documentation of these activities you are referring to? Like, newpaper articles, references to lawsuits, letters from affected parties? Thanks in advance.
I really wish I did have some sort of written documentation. I've only heard the stories by word of mouth. Still, I've not researched any of it, nor had I even thought about it for years, until I read your post. There could possibly be quite a bit of things written about these practices. Knowing where to look is probably the difficult part. I certainly wish you the best.