Student Loan DebtA June 14, 2012 Propublica article discusses the plight of Francisco Reynoso, a Palmdale, CA gardener who began receiving threatening phone calls from debt collectors after his son died. The collectors were looking for Reynoso to make good on his son’s private student loans, for which Reynoso had co-signed.

Distraught, Reynoso sought the help of a bankruptcy law firm in the Los Angeles area.   Unfortunately, bankruptcy won’t help to alleviate Mr. Reynoso’s student loan problems.

But there’s a hidden gem or two in the article, something that indicates our distraught dad may find some relief from the debts that haunt him.

The Propublica article states that

The grief was relentless; the debt collectors, ruthless. By law, debt collectors must go through a debtor’s attorney if one has been hired, but even after Reynoso hired an attorney, he said they continued to call him every day, several times a day, for about a year and a half: “I would tell them to call the lawyer. And they would still say, ‘The lawyer doesn’t owe us. You’re the one who owes us. You’re the one who has to pay us.'”

There’s the rub, I think. Reynoso was troubled by not only the debt, but the phone calls that followed in spite of what appears to have been a notice of representation by his lawyers.

If I were involved in this matter, the first thing I’d do is file a lawsuit under the Fair Debt Collection Practices Act as well as under the California Rosenthal Act, both which limit the means by which debt collectors may attempt to collect from a consumer.

Under the FDCPA, it is a violation of federal law to contact a consumer about a debt once it is know that the consumer is represented by a lawyer.

In the event that the letter contained a dispute of the balance alleged to be due (which, judging by the story, seems to have been in order) then the debt collector must also cease reporting the debt on the consumer’s credit report as well as include a notation that the debt is disputed. A failure to take those actions may be a violation of the Fair Credit Reporting Act.

Violations of both the FDCPA and the FCRA can yield money damages for the consumer as well as payment of the consumer’s legal fees. Perhaps not enough to pay off the loans, but surely taking action will stop the collection calls and lead Mr. Reynoso closer to an answer as to who owns the loans in the first place.

Mr. Reynoso should also look into whether the statute of limitations has run on the collection of these private student loans. In California, the statute of limitations – in other words, the time in which a lender must file a collection lawsuit or lose the opportunity to do so forever – is four years from the date on which the account goes past due.

Reynoso’s son, Freddy, graduated in May 2008. He died in 2012. Depending on when he went into default, the statute of limitations on collection of the student loan may have run out.

(By the way, this is a major difference between private and federal student loans – there’s no statute of limitations on federal loans).

If the colllector is contacting Reynoso about loans that are no longer legally enforceable, that may be a further violation of the FDCPA.

It will be interesting to see how this one turns out.