Navient, the country’s largest servicer of student loans, is being sued by the federal government. Navient “systematically and illegally (failed) borrowers at every stage of repayment,” according to the federal lawsuit filed last month by the Consumer Financial Protection Bureau (CFPB). It’s alleged that Navient used “shortcuts and deceptions” to provide customers with bad information about their loan repayments. The company also failed to process payments correctly and illegally cheated some customers out of their rights to lower payments, the CFPB said.
It was also alleged that Navient deceived private student loan borrowers about requirements to release co-signers from their loans and harmed the credit of borrowers, including military veterans and people with disabilities. CFPB Director Richard Cordray 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 (the suit) seeks to hold them accountable.
Navient, a spin-off of Sallie May, provides customer service, repayment support and student loan consolidation information for more than 12 million customers with some $300 billion in government and private student loans. Also named in the suit were Navient Solutions (which is responsible for loan serving operations) and Pioneer Credit Recovery (which specializes in the collection of defaulted student loans). The suit is seeking restitution for affected borrowers, as well as financial penalties to the companies. As many as half of Navient customers could be affected, according to the lawsuit.
There is precedent for recovery on Navient loans. Last year, the Department of Justice announced almost 80,000 U.S. service members would receive part of a $60 million judgement in compensation for having been charged excess interest on their Navient student loans.
The Delaware-based company is disputing the claims made in the suit and said it would vigorously defend these false allegations.
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