Iowa Student Loan stopped using confessions of judgment. Regulators praise our practices.
Editor's note: The April 21 Register editorial "Student borrowers shouldn't be asked to sign away their rights" noted court filings within the preceding month when Iowa Student Loan had filed previously signed confessions of judgment in court proceedings. By signing a confession of judgment, the borrower had waived all rights to participate if Iowa Student Loan initiated court proceedings against them, including the right to notification. One result is that borrowers have been subjected to court judgments that freeze their bank accounts or garnish wages without knowing that’s happening. Four plaintiffs have filed lawsuits against Iowa Student Loan asking the court to throw out the confessions of judgment that they signed.
Recently, Iowa Student Loan Liquidity Corporation’s use of confessions of judgment has been in the news, but we feel that discussion has lacked some information, and mischaracterizes our practices as we work directly with our borrowers.
Some of our borrowers struggle to repay their private student loans. As a nonprofit, we go to extraordinary measures to try to help our borrowers be successful in repayment. We work with struggling borrowers to allow them to stop making payments for periods of time and we adjust payment amounts to help ease the burden of repayment. Unfortunately, some borrowers still default on their loans, at which time we offer them generous settlement agreements so both parties can avoid going to court. Confessions of judgments are included with these settlement agreements so we can avoid filing suit against borrowers at the time of default. A confession of judgment does not get filed with the court unless the borrower fails to honor their settlement agreement and refuses, or does not respond to our attempts to contact them. In all circumstances, taking borrowers to court is a last resort, used only when borrowers refuse or do not respond to our attempts to assist them.
Confessions of judgment are a serious legal matter, and we went to great lengths to ensure our borrowers knew what they were doing. We always communicated to our borrowers both verbally and in a letter, advising them to review the document with their attorney. This letter also required the borrowers to sign the confession of judgment in front of a notary public, which emphasized the importance of the document.
Our critics are confusing our practices with those of abusive lenders, and nothing could be further from the truth. Our federal regulators have pointed to our settlement agreements as an example for other lenders to follow. We used confessions of judgment as one component of a generous repayment strategy for borrowers in default. Iowa Student Loan stopped including confessions of judgment in settlements it negotiated some time ago to avoid the risk of bad publicity, should our practices be misconstrued.
Iowa Student Loan Liquidity Corporation is compassionate to our borrowers that struggle to repay their loans. In addition, we focus on educating families prior to borrowing by providing tools to help them plan good outcomes from college and borrow less to pay for it. For those that need to borrow funds beyond federal loans, we offer rates on our private loans that, on average, are significantly lower than rates from other private student loan providers. For these reasons, we should be the first choice for Iowans that need to use private student loans to help pay for college.
Christine Hensley is chair of the Iowa Student Loan Liquidity Corp. board. Steven McCullough is CEO.
This article originally appeared on Des Moines Register: Iowa Student Loan stopped collecting confessions of judgment years ago
