Consumer Finance

CFPB Sues Student Loan Servicer Navient

The Consumer Financial Protection Bureau (CFPB) announced yesterday (Jan. 18) that it has filed suit against Navient, the largest servicer of federal and private student loans in the United States.

The CFPB suit alleges that Navient, formerly part of Sallie Mae, has been in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Credit Reporting Act and the Fair Debt Collections Practices Act. The bureau claims that Navient and two subsidiaries provided bad information, processed payments incorrectly and failed to act when borrowers issued complaints — systematically and illegally failing borrowers.

Additionally, the CFPB alleges that Navient cheated borrowers out of options to lower repayments, which the Bureau claims caused borrowers to pay more than they had to for their loans. From January 2010 through March 2015, the CFPB alleges that Navient added as much as $4 billion in interest charges to borrowers’ principal balances if they were enrolled in multiple, consecutive forbearances, a large portion of which the bureau believes could have been avoided.

The CFPB lawsuit seeks to recover relief for borrowers harmed by Navient’s alleged servicing failures.

Richard Cordray, CFPB director, said, “For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans. At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them, and today’s action seeks to hold them accountable.”

The bureau also alleges that Navient’s subsidiary Pioneer misrepresented the federal loan rehabilitation program by implying that completing the program would erase all adverse information from the borrower’s credit report and collection fees would be forgiven upon completion.

Today, Navient services the loans of more than 12 million borrowers nationwide, including over 6 million accounts under contract with the Department of Education. Combined, Navient services over $300 billion worth of federal and private student loans.

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