CFPB Sues Navient, Formerly Sallie Mae, for Cheating Borrowers

On January 18, 2017, the Consumer Financial Protection Bureau announced that it, in conjunction with State Attorneys General, will sue the nation’s largest servicer of both federal and private student loans, Navient, for “systematically and illegally failing borrowers at every stage of repayment.”

In its official release, the CFPB  stated a litany of charges it is pursuing regarding Navient’s treatment of its student loan borrowers, concluding  that the bureau  “seeks to recover significant relief for the borrowers harmed by these illegal servicing failures” through its lawsuit.

You can view the full release from the CFPB here.

Here’s what some of our partners and other advocacy groups have to say about the CFPB’s Navient lawsuit . Click through headlines for full releases.

Consumer Federation of America

Rohit Chopra, Senior Fellow at the Consumer Federation of America:

“For too long, nation’s largest student loan company has been running roughshod over student loan borrowers. While it’s sat at the top of the list when it comes to consumer complaints, it’s been at the bottom of the list when it comes to customer service. According to Department of Education data, the newly-named company has lagged at the back of the pack when it comes to borrower service – usually dead-last — in every quarterly survey of borrowers.

With its long history of regulatory run-ins, from the student loan kickback scandal a decade ago to the more recent military family overcharging scheme, the time for accountability is long overdue.”

Consumers Union

“Consumers Union, the policy and mobilization division of Consumer Reports, applauded the CFPB and said today’s action underscored the importance of having a tough financial watchdog looking out for the interests of consumers.”

Suzanne Martindale, staff attorney for Consumers Union:

“For too long, students and families have been pushed deeper in debt because loan servicers like Navient have given them the runaround at every stage of repayment,” said Suzanne Martindale, staff attorney for Consumers Union.  “The CFPB’s investigation reveals how devastating these servicing failures can be to borrowers.  The agency should be lauded for taking action to hold Navient accountable for their egregious practices and working to ensure borrowers are treated fairly and get the relief they deserve.”

Consumerist

“Eighteen months after Sallie Mae spin-off Navient revealed that its wholly-owned subsidiary Navient Solutions Inc could one day be on the receiving end of a federal lawsuit related to its student loans servicing practices, the day has come to pass. The Consumer Financial Protection Bureau, along with two states, filed lawsuits against the nation’s largest student loan company for allegedly cheating borrowers out of repayment rights.”

Generation Progress

Maggie Thompson, Executive Director of Generation Progress:

“We hear constantly from borrowers who were deceived by Navient about their repayment options. We applaud the CFPB for standing up to their systematic failures with this lawsuit. Student loan servicers need to start acting more like loan counselors instead of debt collectors. Enrolling in an income-driven repayment plan should be a streamlined and simple process for borrowers. Far too often distressed borrowers are failed by Navient when they try to find a path to sustainable repayment on their loans. Navient preyed on the most vulnerable borrowers to stretch a profit and this lawsuit is welcome news to the borrowers they let down.

Protecting the rights of borrowers from predatory behavior from companies like Navient is exactly why we need a strong CFPB looking out for students and families struggling with their loans.”

National Consumer Law Center Contacts

Persis Yu, Director of National Consumer Law Center’s Student Loan Borrower Assistance Project:

“We applaud the Consumer Financial Protection Bureau for taking critical steps to protect student loan borrowers who have been harmed by Navient’s practices, which created obstacles to repayment by providing bad information, processing payments incorrectly, and failing to act when borrowers complained. It is especially distressing that Navient misreported to credit reporting companies loan defaults by disabled borrowers, including severely injured veterans, who were entitled to loan discharges.

The CFPB’s lawsuit against Navient is important for ensuring that student loan borrowers are given every opportunity to succeed in repaying their student loans. “

Progress VA (Full Statement Below)

New Navient Lawsuit Illustrates Need For Urgent Student Loan Reform
Borrowers’ Bill of Rights would protect Va. students from similar predatory practices

“This morning the federal Consumer Financial Protection Bureau announced they are filing suit against Navient, the nation’s largest servicer of federal and private loans, for “systematically and illegally failing borrowers at every stage of repayment.” The suit underscores the need for immediate state action in Virginia to pass a Borrowers’ Bill of Rights to protect the over 1 million Virginia student loan borrowers from similar predatory servicing practices. Senator Janet Howell’s SB1053 and Delegate Marcus Simon’s HB1915 are supported by Governor Terry McAuliffe and would give the State Corporation Commission the power to license student loan servicers and establish a state Student Loan Ombudsman to support borrowers in identifying their repayment options.

The CFPB’s suit against Navient alleges the servicer failed to properly apply payments, steered borrowers towards paying more than they had to, obscured information and deceived borrowers, and harmed the credit of disabled borrowers, including injured veterans.

‘Today’s suit against Navient from the CFPB is great news for borrowers who have been harmed by their predatory and deceptive practices,” said Progress Virginia executive director Anna Scholl. “But Virginia can and should be doing more to stand up for Virginia student loan borrowers. Borrowers are working hard and playing by the rules to pay off their loans but servicers aren’t held to the same standard. No one should have to fight with their loan servicer to figure out how much money they owe or make sure their loan payments are being properly applied. The General Assembly should stand with the over 1 million Virginia borrowers who owe student loans and immediately send the Borrowers’ Bill of Rights to Governor McAuliffe’s desk.’

Nationally, over 44 million Americans owe over $1.4 trillion in student debt, the nation’s second largest consumer debt burden. In Virginia, over 1 million residents owe over $30 billion. A January 2016 poll conducted by Progress Virginia Education Fund found 76% of Virginians support establishing a state Borrowers’ Bill of Rights.”

Student Debt Crisis

Natalia Abrams, Executive Director of Student Debt Crisis:

“We applaud the Consumer Financial Protection Bureau (CFPB) for taking strong action against Navient/Sallie Mae, by filing three separate lawsuits. The cases highlight a myriad of illegal behavior designed to maximize profits by taking advantage of students. For years, student loan borrowers have complained about deceitful practices from one of our nation’s largest student loan servicer. We have consistently heard from our members about the devastating harm Navient has caused them and their families. From overcharging borrowers to providing inaccurate repayment information, Navient has cost people millions of dollars, destroyed their credit, and left families to pick up the pieces caused by their servicing errors. One of the most unsettling findings in the CFPB’s lawsuit is the irreparable harm Navient has done to our service members and veterans.  It is important that we continue to fund the CFPB. Actions like the ones take against Navient/Sallie Mae are vital for the financial success of Americans everywhere.”

U.S. PIRG 

 Christine Lindstrom, Program Director for U.S. PIRG Higher Education:

“The 12 million borrowers holding more than $300 billion in student loans with Navient need fairness and debt relief, and the CFPB’s lawsuit will ensure their case is made. This loan servicer is yet another powerful financial firm that must be held accountable for lending and collection practices that drive up student debts.

For Americans shouldering over $1 trillion in student loan debt, today’s announcement demonstrates that, absent strong leadership of the agency, borrowers would continue to be subjected to illegal practices by Navient that makes paying back student loans more difficult and costly for borrowers.”

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