In Another Reversal, the CFPB Dismisses Case Against National Collegiate Student Loan Trusts

On April 28, 2025, the District Court for the District of Delaware granted a joint motion to dismiss with prejudice a lawsuit brought by the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) against the National Collegiate Student Loan Trusts (“Trusts”). Litigation had been ongoing since 2017, and days before President Donald Trump’s inauguration, the parties agreed to settle the Bureau’s claims for $2.25 million and the implementation of certain practice changes.

Background

For background, the Trusts are 15 special-purpose Delaware statutory trusts. From 2001 to 2007, the Trusts acquired and provided financing for over 800,000 private student loans, with a principal amount of more than $15 billion through the issuance of approximately $12 billion in investor notes. In 2017, the CFPB sued the Trusts in federal court, alleging that the Trusts, through the actions of their servicers and sub-servicers, engaged in unfair and deceptive debt collection and litigation practices. Along with the complaint, the CFPB filed a purported consent judgment that the CFPB represented to the court as having been executed by the defendants. After various Trust-related parties intervened, the district court denied the CFPB’s motion to enter the consent judgment, finding that the attorneys who executed it on behalf of the defendant Trusts were not authorized to do so by the proper Trust parties.

After various judicial developments, the case made its way to the Third Circuit, and in March 2024, a three-judge panel of the Third Circuit held that the Trusts were “covered persons” subject to the CFPB’s enforcement authority under the Dodd-Frank Act because they “engage” in consumer financial products or services; i.e., student loan servicing and debt collection. The Supreme Court declined to review the Third Circuit’s decision, and the case was remanded to the district court to begin discovery on the underlying facts of the case.

Proposed Settlement

On January 16, 2025, just four days before President Trump took office, the parties filed a proposed joint stipulated judgment with the court to settle the matter. Among other things, the proposed settlement would have prohibited the Trusts from causing a service provider to collect or seek to collect certain debt, furnish information to consumer-reporting agencies related to that debt, or resell that debt. The proposed settlement also would have required the Trusts to ensure all collectors, including law firms, had sufficient training and documented compliance programs. In addition, the proposed settlement would have required the Trusts to pay $2.25 million in consumer redress and to comply with other provisions that have become standard in CFPB settlements, such as obtaining acknowledgements of the settlement from relevant individuals and responding to written requests from the Bureau regarding the Trusts’ obligations under the settlement.

At the Trusts’ request, the court agreed to wait to enter the order until noteholders in the Trusts’ debt securities had time to object to the settlement.

Dismissal with Prejudice

On April 25, 2025, under Acting Director Russel Vought, the Bureau filed a joint motion to dismiss the lawsuit with prejudice. The court granted the motion and terminated the proceedings on April 28. Dismissing a case with prejudice is significant because it essentially prohibits the Bureau from filing the same claims against the defendant in the future.  

This is not the only pending or settled lawsuit the Bureau has moved to dismiss with prejudice since President Trump fired former Director Rohit Chopra, and the dismissal is consistent with a variety of other steps the Bureau has taken in recent months to roll back actions taken under the Biden Administration. For example, earlier this month, the Bureau announced that it will not prioritize enforcement or supervision actions with regard to entities that do not comply with requirements related to the Bureau’s non-bank registry, colloquially known as the repeat-offender registry. As another example, in February, the Bureau submitted a motion to withdraw an amicus brief that it filed in the waning days of the Biden Administration which argued that a certain home equity investment product was credit under the Truth in Lending Act. Further, in March, the Bureau moved to vacate a redlining settlement that had already been entered by a court in an action that settled in November 2024. (Read our analysis of this action.)

Implications for the Industry

This dismissal is the latest in a series of actions taken by the Trump Administration that signal less aggressive enforcement of federal consumer financial protection laws against the consumer credit industry, including secondary market participants. It remains to be seen whether state attorneys general or private plaintiffs may seek to bring actions against securitization trusts using similar theories of liability as the one previously pursued by the CFPB against the Trusts. However, while the Third Circuit’s decision remains unchanged, the posture of the new administration suggests a more hands-off approach in dealing with the financial services industry.