Recently, student loan giant, Navient, agreed to voluntarily suspend collection
activities on the debt of certain borrowers who have filed for bankruptcy
while a lawsuit filed by the Consumer Financial Protection Bureau is pending
in court. The CFPB alleged that Navient “systematically and illegally
[failed] borrowers at every stage of repayment” by creating obstacles,
incorrectly processing payments, cheating borrowers out of their rights
to lower payments, and by partaking in other illegal and deceptive activities.
The voluntary suspension of collection activities affects borrowers who
filed for bankruptcy after October 2005 and used the money borrowed to
attend non-accredited programs. Under this agreement, Navient is still
allowed to send borrowers monthly statements but the company will no longer
aggressively pursue the debts during the remainder of the trial.
The CFPB lawsuit is just one of several that have been filed against Navient
this year as a result of the company’s student loan practices. The
company was also sued by the Attorney General in Illinois and Washington
for its deceptive and predatory behavior regarding student loans. The
accusations in these lawsuits all stem from the company’s use of
subprime loans and predatory behavior.
In the lawsuit brought by the Illinois Attorney General, the complaint
alleges that Navient failed to perform its core duties in servicing over
$300 billion in student loans for more than 12 million borrowers. It further
alleges that the company did not inform struggling borrowers about available
repayment options and failed in its duties as the primary contact of information
to federal student loan borrowers. Moreover, the company allegedly engaged
in unfair and deceptive debt collection practices and repeatedly misled
borrowers as they struggled with their loans.
In the lawsuit brought by the Washington Attorney General, the complaint
alleges that Navient improperly steered struggling student loan borrowers
toward short-term forbearances and engaged in aggressive and misleading
collection tactics. Forbearance allows borrowers to have their payment
temporarily suspended by the lending company. However, interest continues
to accumulate on the debt and is added to the loan principal when the
borrower resumes payments. Navient also allegedly engaged in improper
and deceptive collection tactics, which included harassing phone calls
and attempts to collect based upon incorrect information, among others.