Unfair, Deceptive, and Abusive Acts and Practices in the Servicing of Void and Unenforceable ISAs

Abstract

This memo explores how state law may render many ISA companies’ contracts unenforceable, and how the continued servicing of voided debts may amount to a violation of state and federal law. As the memo discusses, this finding may have far-reaching legal consequences for the growing share of the student loan industry involved in ISA servicing. Because they meet the definition of loans, ISAs must comply with various state and federal consumer protection statutes and regulations. An SBPC investigation reveals that various ISA providers may be violating many of these state laws, including state usury and licensing statutes, and that violations along these lines often render consumer debts void. The SBPC’s analysis indicates that state and federal law enforcement agencies such as the Consumer Financial Protection Bureau already have the capability to hold companies accountable for servicing unenforceable debt.