CFPB Sues Navient Over Allegations of Deceiving Borrowers Throughout Repayment

By Brittany Hackett, Communications Staff

The Consumer Financial Protection Bureau (CFPB) is suing Navient, accusing the student loan servicer of “systematically and illegally failing borrowers at every stage of repayment,” according to a press release from CFPB.

The announcement on Wednesday alleges that Navient, formerly part of Sallie Mae and the nation’s largest student loan servicer, “has failed to provide the most basic function of adequate student loan servicing at every stage of repayment” for both federal and private student loan borrowers, and is in violation of three consumer protection laws:

  • The Dodd-Frank Wall Street Reform and Consumer Protection Act;
  • The Fair Credit Reporting Act; and 
  • The Fair Debt Collections Practices Act.

The company allegedly provided borrowers with inadequate information in writing and over the phone, incorrectly processed repayments, did not address customer complaints, and created obstacles for struggling borrowers to lower their repayment amounts.

“At every stage of repayment on student loans, Navient has failed to follow the law and caused borrowers needless anxiety and aggravation,” CFPB Director Richard Cordray said in a statement. “Borrowers and the CFPB have reason to expect better from the nation’s largest student loan servicer.” He said that CFPB will be seeking redress for affected borrowers and to prevent Navient from continuing the illegal conduct outlined in the lawsuit.

Specifically, CFPB’s lawsuit charges that Navient Corporation and two of its subsidiaries – Navient Solutions and Pioneer Credit Recovery – failed to correctly allocate or apply borrower repayments to their accounts; did not provide consumers information on how to lower their repayments or maintain lower repayments; deceived private student loan borrowers about what is required to release a co-signer from a loan; and harmed the credit of disabled borrowers and severely injured veterans by misreporting data to credit reporting companies.

Navient also allegedly made illegal representations through Pioneer Credit Recovery related to the federal loan rehabilitation program that is available to borrowers in default. According to CFPB’s lawsuit, Pioneer falsely stated or implied that completion of the rehabilitation program would remove all adverse information about a borrower’s defaulted loan from their credit report, as well as misrepresenting the collection fees that would be forgiven when the program is completed.

In response to CFPB’s lawsuit, Navient issued a statement strongly rejecting the allegations against them and vowing to defend itself in court. Naivent has also released a fact sheet addressing the allegations.

“The allegations of the Consumer Financial Protection Bureau are unfounded, and the timing of this lawsuit—midnight action filed on the eve of a new administration—reflects their political motivations” Navient said in the statement. “[T]he suit improperly seeks to impose penalties on Navient based on new servicing standards applied retroactively and applied only against one servicer. The regulator-asserted standards are inconsistent with Department of Education regulations, and will harm student loan borrowers, including through higher defaults.”

“We cannot and will not accept agenda-driven ultimatums designed to get headlines rather than help for student borrowers. We will vigorously defend against these false allegations and continue to help our customers achieve financial success,” the company said in the statement.

According to CFPB, Navient services more than 12 million student loan borrowers, including more than 6 million accounts through its contract with the Department of Education. In total, Navient services more than $300 billion in federal and private student loans.

 

Publication Date: 1/18/2017


Miriam M | 1/19/2017 7:1:04 PM

I am glad to see action against Navient. I had a student with statements showing the incorrect date and amount of his payments to the lender.

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