WELLS FARGO PRIVATE STUDENT LOAN DEBT SETTLED

We were retained by a client about a year ago with a Wells Fargo private student loan with a balance of just over $100,000. The client had just defaulted on the loan which means that there was no payment for roughly six months. At that point Wells Fargo as well as every other lender writes off the debt as a bad debt and then receives a tax deduction on their corporate taxes. Then, the private student loan lender will decide whether to pursue the defaulted consumer through collection efforts; whether they will send the account to a debt collection law firm to sue and obtain a judgment against the consumer or whether they will sell the debt to a third-party debt buyer for pennies on the dollar. The debt buyer can then decide whether they want to sue the consumer as well.

In this case, Wells Fargo first tried collecting the debt through their internal collections unit and then sent it out to a third-party collection agency a few months later. Finally, it was sent to Harris Beach, a debt collection law firm that frequently handles the collection enforcement of Wells Fargo private student loans. Harris Beach's goal is to sue the consumer and obtain a default judgment against them so that they do not have to litigate the matter very far making it easy and cheap for Wells Fargo. Once they obtain judgment they will look to enforce it by means of wage garnishment, bank levy, and placing a lien on any real property. Certain types of funds however, such as social security, unemployment, pension, and worker's compensation are exempt and cannot be levied or garnished. We protected our client against judgment by submitting an answer and requesting discovery from Harris Beach to force them to show proof that they owned the debt and that the amount sought was proper.

Wells Fargo made the decision that they would rather offer a settlement to resolve the loan rather than litigate. We were able to obtain a $25,000 settlement for our client reducing the debt by over $75,000. Our experience with private student loans has shown that Wells Fargo is one of the lenders that is willing to offer great reductions in settlement when the client has serious financial and or medical hardship, as well as a potential large lump sum payment. However, it is most important to counter their initial leverage with legal defenses to obtain the best deal possible and protect the consumer.