NCSLT Ruling Could Increase Trusts’ Vulnerability to Financial Risks and Legal Suits, Moody’s Investor Service Reports

A new report published on February 28, 2022, by Moody’s Investor Service discusses the drastic effects of the Consumer Financial Protection Bureau v. National Collegiate Master Student Loan Trust lawsuit on the securitization industry. The recent judicial ruling could allow a federal agency to sue securitization trusts over their servicers’ debt-collection and litigation practices which raises legal and financial risks for the market. The trusts in the case have filed a motion to appeal and are awaiting the decision from the Third Circuit Court of Appeals as to whether it will take up the issue. As noted by Moody’s Investor Service, a decision from the Court to uphold the CFPB’s enforcement action will set precedent by exposing trusts and underlying investors to punitive legal costs and suits that could lead to negative credit events.

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