In a Press Release issued on January 18, the CFPB announced that it was suing the nation’s largest student loan servicer, Navient Corporation, for illegal activity at every stage of the student loan process. The company is accused of systematically creating obstacles to repayment by providing bad information, incorrectly processing payments and failing to act on customer complaints. The complaint alleges that Navient’s conduct resulted in borrowers paying much more than they would have had their loans been properly serviced and had they been given accurate information about alternative repayment plans.
Navient, formerly part of Sallie Mae, Inc., services more than 12 million student loans approximately half of which are through its contract with the Department of Education.
According to CFPB Director, Richared Cordray, “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.”
Specifically, the CFPB accuses Navient and two of its subsidiaries, Pioneer Credit Recovery and Navient Solutions, of:
- Failing to correctly apply or allocate payments to borrower’s accounts,
- Steering borrowers who had trouble repaying their loans away from the lower repayment plans they were entitled to under federal law and into forbearance programs which allow interest to accrue while the borrower is on hiatus from repaying the loan,
- Failing to inform borrowers enrolled in income-driven repayment plans of the need to renew those plans annually,
- Deceiving private student loan borrowers as to the steps necessary to release a co-signer from the loan,
- Harming the credit of disabled borrowers including severely injured veterans.
The lawsuit alleges violations of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the FCRA and the FDCPA.
Tags: CFPB, Student loans