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Student loans have soared over the last decade, becoming the largest source of household debt outside of mortgages. The tide of rising defaults has also turned into a lucrative business, with companies collecting tens of millions of dollars through settlements, wage garnishments and other compelled payments, according to a New York Times analysis today. Transworld Systems has been one of most prolific debt collectors, filing more than 38,000 lawsuits in the last three years on behalf of a single client, the National Collegiate Student Loan Trusts. But many of the cases were flawed, as the debt collector churned out mass-produced documentation based on scant verification, according to legal filings by a federal regulator and a New York Times analysis of court records from hundreds of cases. In September, the regulator, the Consumer Financial Protection Bureau, accused National Collegiate and Transworld, in separate complaints, of using sloppy and illegal collections methods. Both parties agreed to settle and pay more than $21 million in penalties and refunds. Read more. 

Now available in the ABI Bookstore: Pick up your copy of the updated and revised Graduating with Debt: Student Loans under the Bankruptcy Code, Second Edition! 

The Consumer Financial Protection Bureau claims that Freedom Debt Relief, the nation’s largest debt settlement services provider, built its business on lying to its customers about the company’s ability to negotiate debt settlements, HousingWire.com reported. The CFPB announced yesterday that it is suing Freedom Debt Relief and its co-CEO, Andrew Housser, for violating the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Telemarketing Sales Rule by repeatedly deceiving customers. According to the CFPB, Freedom collects fees from customers without settling their debts as promised, makes customers negotiate their own settlements, misleads them about the company’s fees and the scope of its services, and fails to inform them of their rights to money they deposited with the company. “Freedom took advantage of vulnerable consumers who turned to the company for help getting out of debt,” CFPB Director Richard Cordray said. “Freedom deceived consumers about its clout with creditors that it knows do not negotiate with debt-settlement companies, made some customers negotiate on their own, and misled consumers about its fees and their accounts.”

While many people win multimillion-dollar judgments in court, collecting on them is another matter, according to a Wall Street Journal analysis today. A new generation of firms are chasing assets of the superrich who are tardy on payments from judgments, arbitration awards and other financial obligations. In one measure of the potential market, The Global Arbitration Review, an industry journal, estimates there are about $2 trillion in pending arbitration claims world-wide. These high-end collection services — which include litigation-funders, hedge funds and other specialized investors — retrieve what is owed for a share. They are usually hired by people who lack the resources or don’t want to use their own money to collect, even at a time when high-profile scandals are making it more difficult to hide assets around the globe.