Cadwalader attorneys described the implications to the structured finance industry of an enforcement action brought by the Consumer Financial Protection Bureau ("CFPB") against the National Collegiate Student Loan Trusts. In September 2017, the CFPB alleged that National Collegiate Student Loan Trusts violated consumer financial protection laws in connection with student loan debt collection practices.
As described more fully in the Cadwalader Memorandum, the CFPB's Proposed Consent Judgment contains terms that would effectively alter contracts affecting the underlying securitization trusts at issue. The attorneys state that by purporting to alter and thereby effectively rewrite these agreements, the CFPB's Proposed Consent Judgment upended well-established and long-standing market expectations. They concluded that the result threatens to undermine investor confidence, destabilize the student loan securitization market and, paradoxically, restrict student access to credit by making securitizations riskier.
Parties to the transaction agreements (which were non-parties to the litigation) sought to intervene in the proceedings. On October 19, 2018, the Honorable Maryellen Noreika issued a Memorandum Opinion that granted the Motions to Intervene, on the basis that the Proposed Consent Judgment and settlement approved by the equity holder might impermissibly alter the existing contractual obligations.