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This past Friday, my girlfriend got hit with a surprising and aggressive
student loan collection move by (unnamed bank) that was stunning beyond my
belief. We're looking into the validity of what they did and are preparing
to challenge it, however, in the meantime, they have basically cleaned out
all of the funds in her checking account and left her with a significant
negative balance due to checks that bounced as a result of this unannounced
action.
This is all started over two years ago as a result of the fact that the loan
went into default during the time when my girlfriend had been laid off and
basically had no money coming in.
After she got a job over a year ago, she was able to speak with a
collections agent who reluctantly agreed to a monthly payment arrangement
which my girlfriend has been following faithfully for over a year now. They
conveniently have no record of the agreement, yet they have been cashing her
checks all this time while still continuing collection activity.
Part of what's so dumbfounding about this is that they allowed a debit to go
through for more than was in her account at the time despite the fact that
they had access to her checking account information. The implication seems
to be that it doesn't matter if the money is really there or not. The
student loan division of the bank is supposedly a "separate entity"
according to the banker we spoke to on Saturday (explaining why she couldn't
pull up any information on the student loan account.) So yeah...
separate entity supposedly, but they used a "bank ordered debit" transaction
to seize the funds. Doesn't sound very "separate" to me. It's separate
when it's convenient for them and not separate when it's convenient for
them.
To me, as an outsider, it looks like the student loan division of the bank
basically just offloaded the debt from the student loan division to the
consumer banking division and made it so now the collection problem was in
the hands of the banking people.
I used to admire (unnamed bank) since I bank there as well. But this
situation has left a bad taste for me and every time I go to a (unnamed
bank) ATM I feel a certain sense of disgust and violation.
I have a personal account with (unnamed bank) and my girlfriend and I also
had a joint checking account there. I had to close the joint account today
because I foresee a scenario where they would hit the joint account for
money because my girlfriend's name is on it, once again offloading their
debt problem to the banking division. The banking division would then in
turn go after funds in my personal account to cover the negative balance in
the joint account because my name is on the joint account.
The more I thought about it, the more I realized that that scenario is more
than just possible-- it was very LIKELY to happen. So I had to take
action to cover my arse.
Anyone have any opinions on whether they had the right to seize the funds
despite the verbal agreement that was in place and despite the fact that
they had been accepting and cashing the checks for the agreed upon amount
every month?
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On Mon, 6 Dec 2004, "Chaps" <spamthis@127.0.0.1> wrote:
[ Debtor who defaulted repaying a federally guaranteed
student loan contends she had orally convinced one of the
lender's representatives, a bank in which she maintained
savings and checking accounts, to agree to forebearance in
exhange for her having made the monthly payments she has
been making for about a year but who chose not to document
any such agreement much less to obtain the bank's clearly-
stated written agreement thereto, expresses dumbfounded
chagrin at to her surprising seizure by way of set-off of her
account leaving her with a negative balance due to checks
to others that bounced as a result and would emphasize that
she would rely in material part on a claim that the loan division
of the bank is supposedly a "separate entity" which, however,
used a "bank ordered debit" transaction to seize the funds. ]
Anyone have any opinions on whether they had the right to seize
the funds?
It was foolish for the debtor to have relied on a merely oral
forebearance arrangment because (apart from the general lack of
prudence in so doing) federal law prescribes not just the content but
also in what form such agreements shall (and how/when they won't) be
enforceable for loans covered by the federal student loan programs
(although, in fairness, it might also be noted that you realtedly also
do not actually make sufficiently clear whether there may have been an
at least partly written element to her claimed such agreement
depending on whether she paid by check and, if so, what if any
memorandum endorsements she made thereon which the bank theereupon
accepted by cashing those checks).
Relatedly but also independently (again, however, as may be affected
by the extent if at all there was a written forebearance agreement as
created by clearly stated endorsements on the checks in issue), it
very probably would be at least equally foolish for the debtor to
insist that the bank has done anything wrongful without her first
confirming not just what her student loan agreement provides but,
since she chose to maintain accounts in the institution which made or
otherwise now owns the loan in issue, also what she agreed with the
bank in/by her customer-with-bank contract (re. which don't bto the
bank very broad set-off/seizure rights beyond those provided for in
the federal student loan and statutes regulating such loans).
To the extent her 'plaint is one arising from the student loan
provisions themselves (compared with just her other customer-with-bank
agreement), before she perhaps too reflexivly places head in butting
position, it probably will be important for her to read carefully the
Tit. 20 U.S.C provsions on point and the related 34 C.F.R. ones
(since, in general, and with just some qualifications/exceptions, the
federal Higher Education Act preempts specific state and federal Fair
Debt Collection Practices Act protections).
As noted, however, one can't reliably tell just from what you've said
whether her 'plaint amounts to anything more than unhappiness at
having to repay a loan that is past due and to her chosen bank's
assertion of contractual rights she willingly gave it.
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