In a move that surprised many in the legal and financial sectors, the Consumer Financial Protection Bureau (CFPB) recently dismissed with prejudice its long-standing lawsuit against the National Collegiate Student Loan Trusts. This April 2025 decision marked a significant development in the intersection of trust law, corporate governance, and federal regulatory oversight. For those following this case or trusts in general, this outcome provides meaningful insights into how the courts approach trust authority in modern finance. If you’re a trusts lawyer or financial professional, this case deserves a closer look.
Background On The Case
The CFPB initially sued the National Collegiate Student Loan Trusts in 2017, alleging that the trusts and their servicers were unlawfully collecting on private student loans that could not be substantiated. At the heart of the case was a disputed consent judgment that the CFPB claimed had been agreed to by the trusts, despite questions about the trusts’ legal ability to bind themselves to such an agreement without formal trustee approval.
Over the years, the case dragged on as courts examined whether the consent judgment was valid and whether the entities involved even had standing to enforce it. Then, in April 2025, the CFPB agreed to a joint motion to dismiss the lawsuit with prejudice, meaning the case cannot be refiled in the future.
Why Dismissal With Prejudice Is Significant
A dismissal with prejudice is not just a procedural close; it’s a strong statement that the matter is definitively resolved. In this case, it indicates that the court found substantial enough concerns about how the consent agreement was authorized or not authorized, that further pursuit of the case would not be justified.
For trusts, this outcome raises pressing questions. Who has true authority in securitized trusts? Can servicers or purported administrators act on behalf of a trust without trustee involvement? This case reinforces the principle that the governance of a trust must adhere to clearly defined roles and fiduciary duties, particularly when regulatory agencies are involved.
The Function Of Corporate Trust Governance
The structure of the National Collegiate Student Loan Trusts illustrates the elaborateness of modern trust arrangements. These are not traditional family trusts; they are structured finance vehicles that own pools of student loans. Often, these trusts are managed by multiple parties, trustees, administrators, servicers, and sometimes investors, all with competing interests.
The legal dispute highlighted how easily those interests can come into conflict, particularly when entities act outside their authority or without proper documentation. It also underscored the importance of precise governance rules and the necessity for trustees to be actively involved in decisions that carry legal liability.
A Subtle Shift In Trust Oversight
The dismissal of this case may not be the end of the conversation. Legal professionals should be mindful of how trust documents are drafted, who is granted authority, and how external entities, like regulators, can challenge those structures. For trusts lawyers, it’s an opportunity to review client arrangements and governance structures to prevent similar complications in the future.
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