Dear Mrs Macaulay,
I signed on as a guarantor for a family member in 2007 at the Students' Loan Bureau (SLB), and specifically told them that I was just signing for a year. I was one of two guarantors. In 2016 I got a letter from a debt collector saying that the loan had been transferred to their collections company, and I would be liable for the debt. At this point I had had no communication from the SLB about any arrears, whether by post or e-mail. The debt collector's letter was the first I was hearing about the loan after almost a decade. I contacted the SLB and the company, and was advised that they had “tried” to contact me, and the loan was in default, for some $800,000. By this time my family member was living overseas, but had, before he defaulted, paid more than the amount owing for a year's debt. Nevertheless, I contacted him and also gave his contact information to the debt collection company, and I was told that they had worked out a payment plan.
Fast forward to the year 2020, and my family member advised me that although he has been paying the debt collection company religiously for years, there seemed to be no end to the loan. When he calculated, he had paid over $1.1million, all without a contract stating a start and end date for payment.
He showed me e-mails from the debt collection company, which keeps demanding money, demanding his tax refunds ¬ —constant demands — all the while refusing to tell him how much his debt balance is, and how much longer he will have to pay. He is at his wits' end, and so am I, because at this rate he will be paying until he is old, all the while paying into a vacuum. And I am caught in this web, even though I only consented to act as guarantor for a year! At this rate I am tempted to tell him to stop paying, and to let them pursue the matter in court even though years ago when the company contacted me, they said they could sue me. What do you suggest? The SLB has been MIA, but from what I know, once the loan leaves the SLB, the debt collectors take over forever.
What an unfortunate circumstance for you and your family member and an unconscionable one of the SLB and its collections company.
You state that you signed as one of two guarantors on your family member's loan agreement and that you told the SLB at the time of signing that you were only doing so for one year. As to this condition of yours of only guaranteeing the loan for a one-year period, unless it was inserted in the agreement, it was and is of no effect. Your obligation as guarantor would, if it was not inserted in the agreement, run for the entire period of the loan's existence.
The SLB's obligation when a loan goes into arrears is to contact the borrower within the next due payment period and send a detailed statement of account of the principal sum still due and the interest applied and at what rate and for what period of time. If it fails to make contact, it must then contact the guarantors, also with a full statement of account as already stated, and request payment from them.
You say that you only learnt of the default in 2016 when you received a letter from the collections company, without a statement of account no doubt. This added to the fact the SLB only told you when you contacted them after the collections company's letter in 2016, that your family member's loan was in default in the sum of $800,000.
You say that this was not done and that they said that they had tried to contact you and yet you received nothing by post or by e-mail from them. I assume from this that you had not changed your address or your e-mail address, which I also assume they had for you as a guarantor. This being so, they would find it difficult to prove that they made any such attempts. A lender is not allowed on loan repayments being in default to not make contact and provide full details in a statement containing the details I have stated, with the date of the last payment and the date it went into arrears, and the interest charges since the default plus any charges being claimed following the default.
Any demand of you as guarantor to take up the liability for the loan requires full and complete details. Lenders are not to charge compound interest, and can only charge simple interest on the sum due at the date of the default. You must have the information to be able to check what they are claiming. Lenders are not allowed to just let time pass while adding to the interest due instead of making contact within a truly reasonable time with the borrower and failing this, the guarantors, AND supply them with the full statement of account I have stated they must.
Anyway, you provided them with your family member's contact and they made contact with him. You have not said that they provided him with a statement of account. You say that he commenced paying the collections company, which is an agent for the SLB, for the collection of the loan and interest, and that he continued until he had paid over $1.1 million. You say this was without a contract, but what about an original statement of account and periodic statements of accounts?
The company, you say, had threatened to sue you years ago and you are tempted to tell your family member to stop paying any more and let them sue. This is one way of dealing with it.
In such actions, you and your family member can adduce evidence to show that the sums claimed from him are excessive, harsh and unconscionable, and ask the court to re-open his loan transaction from the beginning and take an account of his payments to the SLB and those to the collection company, despite any agreement he may have stated or made for settlement of the account, and ask for the court to make an order relieving him from making any further payment and order a refund of payments made in excess of what is fairly chargeable and reasonably was due of the principal, interest and charges. This is certainly doable.
Or, your family member can file a claim on the grounds I have stated in the paragraph above and seek the orders I have also stated there. If he can show that he has paid interest amounting in the aggregate to the principal sum he originally borrowed and which was the sum lent to him, he can bring an action himself asking to be relieved of the transaction and for an account and refund of his over-payment, on the grounds that he has been paying to the total sum he has made and that demands are still being made of him though no statements of account showing principal sum, interest, rate of this and from which date the interest is charged, have been supplied to him at the inception of the claim following his default or thereafter, and that such interests claimed are clearly excessive and so an account should be ordered. He should also claim for costs.
Even though he is abroad, he can obtain the services of a lawyer and he may not even need to appear in person if he cannot travel, as trials have been done online now for a good number of years, wherein the evidence of a witness who cannot for good reason attend in person, can have his evidence given and be cross-examined online. You can of course support and assist him with having the action proceed so that the burden of it can be ended for both of you. The claim can be done in the parish court of the appropriate parish, if the total sum of the claim is within the jurisdiction of the court. If it exceeds this, then it should be filed in the Supreme Court.
This is what I suggest — that he should stop paying and with your help, get his legal representation arranged to quickly file his claim against the SLB and the collections company.
I hope your family member agrees and that he, with your assistance(or with you as a second claimant), file the action in court and move to remove this burden from both your shoulders. You have made no mention of the other guarantor. You should check whether he/she was contacted and what happened. Your family member and you also must not let too much time pass by. You should act as quickly as possible.
All the best wishes.
Margarette May Macaulay is an attorney-at-law, Supreme Court mediator, notary public, and women's and children's rights advocate. Send questions via e-mail to firstname.lastname@example.org; or write to All Woman, 40-42 1/2 Beechwood Avenue, Kingston 5. All responses are published. Mrs Macaulay cannot provide personal responses.
The contents of this article are for informational purposes only, and must not be relied upon as an alternative to legal advice from your own attorney.