Washington,DC January 18, 2017
Navient, the United States’ largest student loan servicer, was sued by the US Government’s Consumer Financial Protection Bureau (CFPB) today.
The Bureau alleges Navient, formerly a part of Sallie Mae, cheated borrowers to save on operating costs. Allegations include providing incorrect information to borrowers, processing payments incorrectly, and failing to act when borrowers complained. Most importantly, Navient systematically made it harder for consumers to utilize their right to pay according to what they can afford. Called income-driven repayment plans, the plan was established in 2009 by the government to help lower the payments of consumers who could not afford them at the current amount, and in some case defer their payments until they had income enough to begin payments. In some cases, after 20 years, the student loan debt could be forgiven entirely.
The CFPB alleges that Navient not only failed to provide this information to consumers, but that it actually provided false and misleading information that guided consumers to forbearance, rather than telling them they had other options. With forbearance, interest continues to accumulate, while other options do not.
The CFPB calculated that from January 2010 to March 2015, Navient’s actions added up to $4 billion in interest charges to the principal balances.
Allegedly, Navient also failed to inform those who did enroll in income-based repayment plans of the need to re-enroll annually. This resulted in customers losing their enrollment and receiving delinquency notices, sometimes resulting in collection actions.
Navient also reported disabled customers, including disabled veterans, to credits reporting agencies that they had defaulted on their loans, when, in fact, those loans were forgiven under the federal Total and Permanent Disability discharge program. Nonetheless, the false reporting of a default on a loan resulted in a negative rating on their credit report.
Navient’s subsidiary, Pioneer, is also alleged to have made illegal misrepresentations relating to the federal loan rehabilitation program. It is accused of misleading people that completing the federal loan rehabilitation program would remove all negative credit reports regarding their loans. It is also alleged that Navient, via Pioneer, lied about collection fees that would be forgiven when they completed the program.
CFPB’s lawsuit alleges that Navient is, and 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.
If you have a loan that is serviced by Navient and believe you have might have been misled by Navient, contact the Consumer Financial Protection Bureau at http://www.consumerfinance.gov/. Or call them at (855) 411-2372.