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Fitch Maintains Rating Watch Negative on 17 Tranches of 12 NCSLT Transactions.

New York: Fitch Ratings maintains the Rating Watch Negative (RWN) on 16 tranches of 12 National Collegiate Student Loan Trusts (NCSLTs). The trusts were initially placed on RWN on Sept. 22, 2017 following the announcement by the Consumer Financial Protection Bureau (CFPB) of action taken against these NCSLTs on Sept. 18, 2017. There has been no significant update to the judgment. The CFPB proposed consent judgment, if confirmed, requires NCSLTs to pay a settlement amount of at least $19.1 million, depending on the results of an independent audit on the NCSLTs' portfolios.

Additionally, on Dec. 17, 2017, the owners of the beneficial interests filed a motion for payment of legal fees and expenses in excess of $2.5 million. Legal proceedings are still pending; however, payment of such fees will also be allocated to each trust.


CFPB Proposed Judgment

On Sept. 14, 2017, the CFPB filed an action against the NCSLTs for illegal student loan debt collection. According to the CFPB, consumers were sued for private student loan debt that the companies could not prove was owed or which were too old to sue over. On Sept. 18, 2017, a proposed consent judgment was filed with the court to settle all matters in the dispute. Among other things, the proposed judgment requires an independent audit of all student loans in the NCSLTs' portfolios. Collections on any student loans identified by the audit to lack proper documentation or for which the statute of limitations has expired on the debt collection would have to cease.

If the proposed judgment is confirmed, it may result, pending the outcome of a portfolio audit, in the NCSLTs making an aggregate payment of at least $19.1 million. The proposed consent judgment specifies that the payment is due within 10 days of the effective date of the judgment. Should this result in a lump-sum one-time cost being charged to the trust as a senior cost it may impair the ability of some of the trusts, depending on the number of trusts affected, to pay senior interest in a timely fashion, resulting in an event of default for the notes. If instead the payment is in some way distributed over time, for example by being advanced through an agent, by a reserving mechanism or other means, it will reduce the cash available to repay noteholders and thereby reduce the available protection. In addition, the outcome of the independent loan audit and the possible effect on the enforceability of underlying loan contracts is at this stage uncertain. As a result of all these factors, all the NCSLT trusts' notes with a non-distressed rating were placed on RWN.

Fitch expects to resolve the Watch when additional clarity, including amount and allocation of payments among trusts, is available on this senior liability requested by the CFPB to the NCSLT trusts.


Allocation of the settlement payment to one or a few NCSLTs trusts in a short period of time may result in multi-category downgrades on the affected trusts. Allocation of the payment across all trusts over a longer horizon may result in smaller downgrades or no rating actions.


No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch maintains RWN on the following:

National Collegiate Student Loan Trust 2003-1:

--Class A-7 'BBsf'.

National Collegiate Student Loan Trust 2004-1:

--Class A-3 'BBsf'.

National Collegiate Student Loan Trust 2004-2/NCF Grantor Trust 2004-2:

--Class A-5-1 'BBsf';

--Class A-5-2 'BBsf'.

National Collegiate Student Loan Trust 2005-1/NCF Grantor Trust 2005-1:

--Class A-5-1 'BBsf';

--Class A-5-2 'BBsf'.

National Collegiate Student Loan Trust 2005-2/NCF Grantor Trust 2005-2

--Class A-4 'BBBsf'.

National Collegiate Student Loan Trust 2005-3/NCF Grantor Trust 2005-3:

--Class A-5-1 'Bsf';

-Class A-5-2 'Bsf'.

National Collegiate Student Loan Trust 2006-1:

--Class A-4 'BBBsf'.

National Collegiate Student Loan Trust 2006-2:

--Class A-3 'BBBsf'.

National Collegiate Student Loan Trust 2006-3:

--Class A-4 'BBBsf'.

National Collegiate Student Loan Trust 2006-4:

--Class A-3 'BBBsf'.

National Collegiate Student Loan Trust 2007-1:

--Class A-3 'BBBsf'.

National Collegiate Student Loan Trust 2007-2:

--Class A-2 'BBBsf'; '

--Class A-3 'BBBsf'.
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Publication:Daily the Pak Banker (Lahore, Pakistan)
Date:Jun 4, 2018
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