David Dayen at New Republic: Every day in America, somebody gets tossed out of a home based on false documents

https://newrepublic.com/article/144230/lefts-misguided-debate-kamala-harris

The Left’s Misguided Debate Over Kamala Harris

My article about a bank’s law-breaking during the housing crisis became a political football, obscuring the real issue at hand.

Back in January, after Donald Trump had nominated Steven Mnuchin as treasury secretary, I uncovered a leaked document from the California attorney general’s office that showed OneWest Bank repeatedly broke foreclosure laws under Mnuchin’s six-year reign as CEO and then chairman. Prosecutors in the state’s Justice Department wanted to file a civil enforcement action against the company for “widespread misconduct,” but the attorney general at the time, Kamala Harris, overrode the recommendation and declined to prosecute. She never gave a reason.

Months later, this revelation has been granted new life, wielded as a political weapon by those who oppose Harris’s possible presidential run—most prominently in Ryan Cooper’s column in The Week about why “leftists don’t trust Kamala Harris.” My report either confirms impressions of Harris as an ambitious sellout, or is breezily dismissed by her defenders as “propaganda” or even subtle racism. Though my story was published before Harris was seated as a senator, and was mostly about how OneWest Bank skirted the law in a rush to kick people out of their homes, it has become a flashpoint in the civil war over the Democrats’ future.

Missing in all of this are the victims of OneWest’s policies. Politicians and partisans only manage to care about the millions of families who saw their lives ruined over the past decade when they can be used as props against political enemies. The lack of accountability for the criminal enterprise in our nation’s boardrooms goes well beyond Harris and continues to this very day. But when actual issues sit on the periphery of our political debates, these problems will never get fixed.

Let’s recognize that no public official in this country, from Barack Obama on down, covered themselves in glory during the foreclosure crisis; to say that Harris failed to prosecute bankers is simply to say that she was a public official with authority over financial services fraud in the Obama era.

From the late Bush years through most of Obama’s presidency, at least 9.3 million American families lost their properties, whether to foreclosure or forced sale. The original sin of faulty loan originations, inflated appraisals, doctored underwriting, and improper placement into subprime loans led to fraudulent misconduct in securitization, loan servicing, loan modifications, and foreclosures, with millions of faked and forged documents used as evidence for the final indignity of eviction. There’s not a single step of the mortgage process that wasn’t suffused with illegal fraud during the housing bubble and its collapse.

The crisis resulted in a punishing recession and countless destroyed lives, not to mention what has been credibly described as an “extinction event” for the black and Latino middle class. Yet from New York to California, Arizona to Florida, Washington state to Washington, D.C., the political class and law enforcement elite responded largely with indifference. Powerful bankers with armies of lawyers were allowed to get away with the crime of the century (thus far).

Just look at the actual charge the Consumer Law Section wanted Harris to file in the OneWest case: a civil enforcement action. Though he was OneWest’s chairman, Mnuchin was never at risk of indictment or conviction. At best, California would have extracted a decent-sized fine from the company—paid for by shareholders—and guarantees meant to deter further law-breaking; it’s possible that Mnuchin, his reputation sullied, would not have ended up in charge of federal banking policy. This watered-down version of public accountability was seen as the best possible outcome, and Harris didn’t even go for that.

This doesn’t make her particularly special. Eric Holder and Lanny Breuer took hiatuses from their careers as corporate lawyers to join Obama’s Justice Department and ensure light punishment for financial abuses. Tom Miller, the attorney general of Iowa, ran the 50-state investigation of foreclosure fraud, which investigated nothing and moved directly to a weak settlement that delivered 90 percent less relief for homeowners than promised. Eric Schneiderman, New York’s attorney general, sold out supporters by agreeing to that settlement, saving it from the brink of collapse. He co-chaired a so-called “task force” on bank crimes that did nothing but ink more toothless settlements and proudly proclaim fake headline numbers about fines from behind a podium.

In other words, if you were to rank the performance of law enforcement officials during this period, everyone would be tied for last. They all deserve criticism for their inability to hold the perpetrators of the biggest incidence of consumer fraud in American history to account. They all displayed shocking cowardice and let down millions of vulnerable people, when they had reams of documentary evidence revealing the crime, enough to extract much more justice and far better outcomes for the victimized. They all ushered in the two-tiered system of justice that sapped people’s faith in democracy and at least partially led to the rise of Donald Trump.

There are plenty of reasons why bank executives avoided the fate they suffered in the late 1980s, when in the wake of the savings and loan crisis over 1,000 executives were convicted. But if we want to indulge in a litmus test over corporate crime, we don’t have to wait for the next wave of abuse to occur.

Every day in America, somebody gets tossed out of a home based on false documents. Their elected officials surely know this; if I get a steady stream of letters from people with consistent stories about mortgage fraud, then senators and congressmen surely do as well. So instead of debating who was “tough” on corporate criminals and who wasn’t—since no one was—we should implore these would-be leaders to speak the hell up about the perversion of justice happening every day in courtrooms and foreclosure auctions across the country.

Senator Harris represents California, where the unconscionable treatment of foreclosure victims continues to terrorize families. Senator Cory Booker styles himself a leader in New Jersey, home to the highest foreclosure rate in the nation. The last time Senator Bernie Sanders said a word about foreclosures was when he was trying to win a primary election in hard-hit Nevada. There are activist groups all over Massachusetts fighting foreclosures that could use some high-profile support from Senator Elizabeth Warren.

Homeowner victims have spent the past decade largely invisible from public debate. The only time their plight gets highlighted is when somebody has an axe to grind against a particular public official. Only then do homeowners get trotted out for sympathy, as if the country didn’t ignore them for years. This is the problem with a politics of personality, which is consumed more with doling out praise and blame for high-profile politicians than demanding justice for broad social problems. It’s time the left put the issues back at the center of public debate.

David Dayen: Revoke Wells Fargo’s Bank Charter

Last week Wells Fargo was caught forcing unwanted insurance on car loan borrowers. This week, they’ve been exposed profiting from a DIFFERENT kind of unwanted insurance:
The latest inquiry, by officials at the Federal Reserve Bank of San Francisco, where the bank has its headquarters, involves a different, specialized type of insurance that is sold to consumers when they buy a car. Called guaranteed auto protection insurance, or GAP, it is intended to protect a lender against the fact that a car — the collateral for its loan — loses significant value the moment it is driven off the lot…

It is not mandatory for car buyers to carry GAP insurance, which typically costs $400 to $600. But car dealers push the insurance, and lenders like it because of the protection it provides. When borrowers pay off the loans early, they are entitled to a refund of some of the GAP insurance premium because the coverage they paid for is no longer needed.

Wells never paid the refunds. It’s hard to keep calling these types of problems mere “oversights” when they pile up. There’s a strategy of neglect at Wells Fargo, where indifference becomes profit. Also the role of a bank is to, you know, be good with counting and distributing money.

In its latest regulatory filing, Wells’ note on Legal Actions is three pages long and includes twelve different open investigations and cases. It says that the firm my have to spend $3.3 billion more than expected just to deal with all the payouts we know about today. As the rest of the industry’s legal risk falls, Wells Fargo’s is rising.

This is why Wells Fargo needs to have its bank charter revoked, and why more people should be making that case. Tossing out the board is a good start, which the Federal Reserve can do today, and which major shareholders can demand. But we don’t have to sit passively and wait for the next revelation about fraud and customer abuse. A take back the charter movement must start today.

David Dayen Broadcasts: Wells Fargo deserves the Corporate Death Penalty

 

David Dayen also joins Ring of Fire Radio withScott Millican today.

Today on Ring of Fire, Investigative Journalist, David Dayen, will join us to unpack the latest Wells Fargo Bank scandal and why he thinks they should receive the corporate death penalty.

 

David Dayen: The financial regulation life cycle: write, water down, chip away, obliterate

By David Dayen, August 2, 2017

The Volcker rule was a sensible principle on the day Paul Volcker announced it in January 2010, in the first Obama administration response to Scott Brown’s Senate victory. Financial institutions shouldn’t be able to take deposits and use the money to gamble in the capital markets. Simple, right? But that one-sentence rule got pinched and hedged when made into legislation, shaped into an incomprehensible mess by the regulators, delayed from enforcement and compliance for years and years, and now is poised to be further pushed into irrelevancy.

Under new management in the Trump administration, the same regulators that wrote the Volcker rule now plan to rewrite it, presumably on terms favorable to the banks. It’ll take a year or more, but RIP Volcker (not him, the rule). By complete coincidence, bank stocks are at an all-time high today.

Regulators can’t completely depart from the legislative text but they have significant leeway. Treasury Secretary Mnuchin already outlined some of these changes earlier this year, including allowing proprietary trading up to $1 billion. We will subsequently see the flowering of subsidiaries at the major banks to duplicate and maximize that $1 billion number. Treasury’s call for “increased flexibility” for exempting market-making or hedging from the rule would just lead to banks calling every trade market-making or a hedge. We’ve already seen banks invent “porfolio hedging,” claiming that virtually any trade offsets the rest of the balance sheet. And the proposed increase in the “seeding provision” would allow banks to make excluded investments (in hedge funds, for example) for up to three years.

The Office of the Comptroller of the Currency (still led by a part-time temp who in his day job is a bank lawyer) has already kicked off this process by soliciting public feedback. None of this requires Congressional input, which is the only way most things have gotten done under Donald Trump. The result will not be so different from the current complex, unenforced rule we have today. But it should give pause to technocratic-based solutions that can be endlessly damaged behind closed doors. If and when lawmakers turn again to breaking down the power of the financial industry, they’d better be prepared to draw some bright lines.

David Dayen: More Trump Populism: Hiring a Bank Lawyer to Attack CFPB Bank Rules

President Trump and Republicans in Congress have broadcast their every intention to gut the Consumer Financial Protection Bureau. The president’s budget attempted to defund it and leading Republicans have called for its director to be fired and replaced with a more Wall Street-compliant regulator.

But much like the bulk of Trump’s agenda, that assault remains in the aspirational phase, and the agency continues to do its work. Earlier this month, the CFPB released a major new rule, flat-out barring financial institutions from using forced arbitration clauses in consumer contracts to stop class-action lawsuits.

Now, Trump has sent out his lead attack dog to overturn the arbitration rule — a former bank lawyer who has used the very tactic the CFPB wants to prevent.

Class-action lawsuits are often the only way abusive behavior is checked. Take one of the more flagrant examples relating to overdraft fees. Millions of Americans are painfully familiar with the little perforated postcard that kindly arrives in the mail, courtesy of your financial institution, informing you that you have overdrawn your bank account and have been assessed a fee. Or, sometimes, you get three of them in the mail.

In order to make sure you get three and not one, banks in the past would re-order your transactions. The case of Gutierrez v. Wells Fargo is instructive here: a federal class-action case in California, the suit charged the bank with debit card reordering, or altering the sequence of debit card withdrawals to maximize overdraft fees. So if a cardholder with $100 in their account made successive withdrawals of $20, $30, and $110 over the course of a day, instead of getting hit with one $35 overdraft fee, Wells Fargo would reorder the transactions from high to low, thus earning three fees.

The plaintiffs won a $203 million judgment in 2010. But in an appeal before the 9th Circuit in 2012, Wells’ lawyers argued that a U.S. Supreme Court ruling in 2011, AT&T Mobility v. Concepcion, gave Wells Fargo the right to compel arbitration and quash the case, even after the judgment was rendered.

The 9th Circuit ruled that Wells Fargo never requested or even mentioned arbitration for five years of litigating the case. Only after losing in court and getting a potential lifeline from the Supreme Court did the lawyers take the shot. “Ordering arbitration would … be inconsistent with the parties’ agreement, and contradict their conduct throughout the litigation,” the court ruled.

Wells Fargo eventually paid California customers, but only after six years of appeals. Yet the company is still trying to use arbitration to quash a similar class action on overdraft fees, which would affect consumers in the other 49 states. Over 30 banks have been sued for this conduct, and every one of them settled the case except Wells Fargo.

Banks have a lot riding on the CFPB rule. Luckily for Wells Fargo, a former senior attorney of theirs is now a top federal regulator. In fact, Keith Noreika worked on that class-action defense in Gutierrez v. Wells Fargo before becoming the acting chair of the Office of the Comptroller of the Currency.

In May, President Trump hired Noreika to take over OCC, in an unusual arrangement where he would serve as a “special government employee,” retained to perform “temporary duties” for not more than 130 days, and exempt from most ethics rules or Senate confirmation.

His first high-profile move is to insert himself into the CFPB rule-making process, the bureaucratic equivalent of laying down in the street in front of the bus.

Right before the CFPB released its final arbitration rule, Noreika charged in a letter that the rule could create “safety and soundness concerns.” On Monday, Noreika asked the CFPB to delay publishing the rule in the Federal Register until OCC could review it for safety and soundness concerns. Essentially, Noreika is saying that allowing consumers to band together to stop petty theft by banks threatens the ability of those banks to survive. The CFPB already sent the rule to the Federal Register, and called Noreika’s request “plainly frivolous.”

Noreika threatened to use Section 1023 of Dodd-Frank, which allows the Financial Stability Oversight Council (FSOC), composed of the major bank regulators, to halt CFPB rules if they put the safety, soundness, or stability of the banking system at risk. The chair of the FSOC, Treasury Secretary Steve Mnuchin, could stay the rule for 90 days pending a vote of the 10-member council. Seven votes would be needed to set aside the rule.

On Tuesday, Sherrod Brown, ranking Democrat on the Senate Banking Committee, wrote to Noreika about his objections. Brown noted that the CFPB made its rule and the research behind it publicly available for two years, and collaborated with safety and soundness regulators throughout the rule-making process. OCC never raised any objections in that time, even after Noreika was named acting chair. “The argument that consumer protections will jeopardize the soundness of banks is as specious today as it has been in the past,” Brown wrote.

Brown also cited a case study in the CFPB’s 2015 arbitration report, which “deals with banks manipulating the order in which they process checking account transactions to charge their customers more overdraft fees.” The CFPB found that consumers benefited from class actions in the overdraft case, while those barred saw little restitution.

“It is especially surprising that you are not familiar with these outcomes,” Brown wrote. “Previously, as an attorney in private practice, you represented Wells Fargo in just such a case, and attempted to quash a class action brought by consumers harmed in exactly the same way by invoking Wells Fargo’s forced arbitration clause.”

Noreika is in fact required to recuse himself from matters involving Wells Fargo, Bank of America, JPMorgan Chase, HSBC, and others, because he has previously represented all of them as a lawyer. Because the arbitration rule isn’t targeted at a specific bank, Noreika is getting around that restriction.

Using FSOC to nix the CFPB rule is a long shot, though it could delay its taking effect. In addition, Congress can overturn the rule by majority vote in both chambers through the Congressional Review Act, as it has done 14 times this year. They have 60 legislative days to take those votes. Senate Republicans are preparing the legislation, led by Banking Committee Chair Mike Crapo.

Top photo: Keith Noreika, acting comptroller of the currency, listens during a Senate Banking Committee hearing in Washington on June 22, 2017.

Contact the author:

David Dayen    david.dayen@​gmail.com

David Dayen: Wells Fargo Is Trying to Bury Another Massive Scandal

The bank became notorious last year for creating fake accounts on behalf of customers. Now it’s trying to kill a class-action lawsuit over shady debit card fees.

Wells Fargo became a poster child for corporations that abuse their own customers last year when it got fined for ginning up roughly 2 million (maybe even more) fake accounts to meet high sales goals. The bank has since tried to block customer lawsuits over that misconduct, using fine print buried in contracts known as the forced arbitration clauses, which force customers to go not before judges but a secretive non-judicial process to get relief.

It turns out Wells Fargo has a long history of using arbitration to evade legal scrutiny. In fact, for the past six years, Wells has tried to use arbitration to block a class-action suit that every other major bank in America long ago settled. This has not only delayed restitution for regular customers, but revealed exactly why Elizabeth Warren’s brainchild Consumer Financial Protection Bureau (CFPB) moved to eliminate class-action bans through arbitration clauses earlier this month: It hands big banks a license to steal with impunity.

The case centers on something called debit card reordering. Let’s say you have $100 in your bank account, and you make three purchases, costing $20, $30, and $110. Under Wells Fargo account guidelines, the bank can charge you a $35 overdraft fee for taking out more than you have in your account. But by reordering the transactions from highest to lowest, putting the $110 charge first, the bank could charge three separate overdraft fees, one for each attempt to draw insufficient funds. Simply by altering the transaction order, Wells Fargo could make an additional $70.

Multiply that by millions of customers, and you’re talking about serious money.

This was a common scheme in the banking industry for years, affecting the poorest customers—those most likely to overdraw their account. A 2014 federal report showed that approximately 8 percent of the US customer base paid nearly 74 percent of all overdraft fees. High fees are one reason the poor often stay out of traditional banks, but lack of access to banking also imposes large burdens from check-cashing and payday lending. In short, it’s very expensive to be poor in America.

Reordering has been ruled deceitful in federal court. Starting around 2008, consumers filed national class-action lawsuits against more than 30 different banks over these bogus overdraft fees. The cases got consolidated in 2009, in the Miami federal courtroom of US district court Judge James King. Most banks eventually settled with the plaintiffs: Bank of America agreed to pay $410 million in 2011; JPMorgan Chase promised $162 million in 2013. To date, banks have shelled out $1.1 billion in restitution for overdraft abuses.

Wells Fargo was the only one to keep fighting.

The bank knew it could be liable for a big payout. In 2010, a California judge ordered it to pay $203 million to customers in that state alone over deceptive overdraft practices. Wells fought that all the way to the US Supreme Court but lost last spring; they finally starting paying Californians in 2016.

A national class-action suit was supposed to compensate Wells Fargo customers in the other 49 states, but a 2011 US Supreme Court ruling offered the bank a potential reprieve. In AT&T Mobility v. Concepcion, a 5-4 decision effectively said companies could use arbitration agreements to ban class-action lawsuits. “Before that, it was assumed that consumers had a right to join a class action,” said Amanda Werner, campaign manager with the consumer groups Americans for Financial Reform and Public Citizen.

Literally two days after the Concepcion ruling was released, Wells Fargo filed to dismiss the overdraft case in favor of arbitration. But Wells had a problem: In both 2009 and 2010, Judge King explicitly asked banks if they wanted to file a motion to move to arbitration, and Wells Fargo declined, apparently preferring to try to win the case. Wells told the court then it “did not move for an order compelling arbitration… nor does it intend to seek arbitration of their claims in the future.” For two years, company lawyers took depositions and filed motions and did everything a litigant would do. Then, after receiving more favorable precedent from the Supreme Court on arbitration, Wells Fargo changed course.

Judge King denied the bank’s motion to dismiss at the end of 2011; Wells appealed to the 11th Circuit. In a unanimous ruling in 2012, the higher court denied appeal, arguing that Wells Fargo missed its chance at arbitration, and pointing out that lots of money and resources had already been spent on the case.

Two years ago, Judge King certified the class, meaning he officially allowed defrauded customers to band together and sue jointly. But the bank again tried to move to arbitration. This would have blocked anyone not named in the lawsuit from joining the suit, limiting millions of potentially affected customers. Judge King again denied the motion last year, writing, “Wells Fargo deliberately chose to pursue a strategy of litigation… it would be unfair to permit Wells Fargo to effectively ‘wait in the weeds’ and invoke arbitration… now that the alternate path the bank chose did not turn out as it had hoped.”

I think you can guess the next sentence: Wells Fargo appealed again, and the 11th Circuit will hear arguments next month. If the bank loses, it could appeal to the US Supreme Court—and all of this is happening before the trial can even begin. “The bank is being uniquely aggressive,” as Lauren Saunders, associate director at the National Consumer Law Center, a consumer justice organization, told me.

In a statement to VICE, Wells Fargo spokesman Kristopher Dahl said, “Wells Fargo continues to believe that arbitration is a fair, efficient and effective way for a customer to pursue a legal claim and resolve a legal dispute.” Dahl added that Wells Fargo stopped reordering debit card transactions in 2010, although they continued to do so for checks and automatic account withdrawals until 2014.

While Wells Fargo has been unsuccessful in blocking the overdraft case, they’ve already managed to punt for six years without having to pay up. (Even after the initial ruling in the California overdraft case, the bank spent six years appealing before eventually complying.) So through legal maneuvering, Wells Fargo could keep accountability for its deceptive practices at bay for years to come.

If the bank does prevail in moving the case to arbitration, people who got screwed and charged extra fees would have to pursue overdraft complaints by themselves. They would be at a major disadvantage: A recent study by the non-profit Level Playing field found that Wells Fargo customers have won only seven arbitration cases in the past eight years, out of just 48 that actually got to a final hearing. And just to pursue the case, consumers would have to spend heavily on legal representation and hearings. As federal judge Richard Posner of the Seventh Circuit Court of Appeals once wrote in a ruling, “The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.”

In this sense, arbitration can stop people from enjoying their legal rights, effectively allowing corporations to overturn the law by making it unenforceable. Deepak Gupta, who argued the Concepcion case in 2011, calls arbitration “a basic threat to our democracy.”

Incredibly, Wells Fargo went so far as to try and use a separate case to sweep this whole overdraft saga under the rug. In a $142 million settlement over the fake account scandal, Wells Fargo tried to fashion such a broad release—”any and all claims and causes of action of every nature and description”—that it could conceivably have forced some overdraft victims to give up their suits. Lawyers for the overdraft plaintiffs objected, and US district court Judge Vince Chhabria ordered the settlement rewritten to be narrower.

Congressional Republicans have been making noise in recent days about overturning the new federal ban on arbitration clauses that prevent customers from joining class-action lawsuits against their banks. Congress can use the Congressional Review act to kill regulations within 60 legislative days of their release; the rule was made final last week. But Republicans will have to explain why corporations like Wells Fargo would benefit from the rollback; the Consumer Protection Bureau’s director Richard Cordray even cited Wells Fargo—albeit over its fake account scandal—when announcing it.

We have an excellent idea of what corporations could do with such a gift: like Wells Fargo, they might try and make it virtually impossible for customers to prevent small-time rip-offs and change their shady behavior. And that could serve to just enable petty theft. In fact, according to one FDIC study, overdraft fee income at Wells Fargo in the first quarter of 2016 increased 16 percent relative to a year earlier, the largest uptick of 600 banks reviewed. We don’t know whether any of those fees were illegally gained, and if Wells Fargo has its way, we never will.

The new federal regulation on class-action suits against banks will not affect the Wells Fargo overdraft case; it doesn’t apply retroactively. But this real-world example of arbitration in action is so blatant that a Republican-led reversal of the rule would seem like a giant upturned middle finger at millions of Americans.

As Amanda Werner of Public Citizen put it, “I don’t know how [Republicans] can look a Wells Fargo customer in the eye.”

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David Dayen at Vice: Billions in Student Debt could Disappear because of Lost Paperwork

Billions in Student Debt Could Disappear Because of Lost Paperwork

The latest example of America’s legal system being a total shitshow might actually help you out—if it doesn’t screw you over first.

In 2006, Pablo Ramirez took out a private loan to attend Westwood College, a now-shuttered for-profit diploma mill in Fort Worth, Texas. Eight years later, he got a court document in the mail: Without his knowledge, he said, a company called National Collegiate Student Loan Trust had won a judgment against him for defaulting on that loan and was demanding roughly $50,000. When Ramirez challenged the ruling, he learned something even stranger.

National Collegiate did not seem to have any actual evidence it owned the debt.

The judgment against Ramirez was eventually overturned this March because National Collegiate “had failed to demonstrate that it was the holder of the note,” as an appeals court found. Ramirez hadn’t kept up with his payments, but at least for now, he’s off the hook.

Thousands of private student loan borrowers may find themselves in the same situation, according to a massive New York Times report this week that’s bringing new attention to a uniquely American legal nightmare. At least $5 billion in defaulted loan debt might not be collectible, potentially bailing out tens of thousands of student debtors.

If this sounds familiar, that’s because it is. One of the huge problems America had to deal with in the mortgage market after the collapse of the housing bubble in 2007 and 2008 centered on something called “chain of title.” Millions of securitized mortgages lacked these “chains,” essentially the ownership record passed down from sellers to buyers. Banks covered for this glaring fuck-up by mass-producing false documents to paper over inaccuracies. Judges mostly played along, but they haven’t given National Collegiate the same courtesy.


Check out this look at how America’s criminal justice systems preys on the poor.


So far, this student loan mess only seems to affect some private loans, which represent about 7.5 percent of the total student loan market, according to data collected by analyst Measure One. Private loans were mostly phased out in 2010 after the feds took over the market; they’re primarily used today to attend sketchy for-profit colleges that, by law, cannot rely entirely on federal financing. Many of these for-profit college loans, which target vulnerable students, have been found to be deceptive.

Before 2010, private student loans were often securitized, just like subprime housing loans before the financial crisis. What this means is that a student would take out the loan, and the lender would bundle it with hundreds of others and sell them through multiple transactions into a trust. The trust would then issue bonds based on the student debt and sell them to investors around the world. The trust would then hire a servicer to take in monthly payments from students, and that money would pass back to investors.

This is where National Collegiate got into trouble. According to an audit of the company’s loan servicer, the Pennsylvania Higher Education Assistance Agency (PHEAA), National Collegiate never received assignments of the loans in its trusts, which would establish the transfer of ownership. In fact, “100 percent of the accounts did not contain an assignment,” the audit found.

How could this be? Why would a company buying hundreds of thousands of loans never secure the proper paperwork showing they actually owned them? The audit hints at a reason: money. The lender assured National Collegiate and its servicer that it could figure out ownership documentation after the fact—if needed. “This became a standard process as it was a less costly option,” according to the audit. After all, many people with student loan debt don’t challenge default judgments, so it made some sense for National Collegiate’s powers that to be to think cutting corners wouldn’t be too costly.

Now that might change. Already, in case after case, from New Hampshire to Ohio, the lender has been found to not actually have possession of the documentation necessary to prove ownership. In hundreds of other instances, according to the Times, National Collegiate has been dismissing cases as soon as they’re challenged to provide docs. That means Pablo Ramirez and other borrowers who stopped paying their loans are getting off scot-free.

All of this might sound vaguely unfair. Why should Ramirez get a break when millions of other former students have to pay? Well, just like borrowers have obligations (to pay their debts), so, too, do lenders. Pablo Ramirez didn’t force the company that took out his loan to engage in multiple complex transactions and then forget to turn over the ownership documents. If National Collegiate is going to aggressively pursue borrowers who fall behind on their loans, proving it owns the debt in question seems like a pretty barebones ask.

Without that requirement, I could walk into a court and announce that Pablo Ramirez—or, for that matter, Donald Trump—owes me money. The system of commerce America has established for centuries relies on proof of ownership. It’s been thrown into disarray in the last few decades, but in theory, at least, this is still how things work.

The real problem here is the near-total lack of accountability for financial companies lending people money in America. In fact, despite numerous no-fault settlements, banks continue to fabricate documents and kick people out of their homes based on false mortgage evidence. It’s no surprise that these tactics have begun to migrate to other kinds of loans. JPMorgan Chase was fined $136 million two years ago for selling credit card debts to collectors with inaccurate and fabricated information. Now we’re seeing the shady behavior crop up in student loans, and you can be virtually certain that National Collegiate isn’t the only offender.

What this comes down to is America failing to defend property records laws by imposing real consequences on violators. In that sense, it was all too predictable that ownership records, from housing to student loans, would turn into cesspools. And it’s worth bearing in mind that way more borrowers are harmed by this chaos than are bailed out.

Maybe someday we’ll hold companies like National Collegiate as responsible for their obligations as we do borrowers who aren’t quite as lucky as Pablo Ramirez.

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