The Consumer Financial Protection Board has taken action against Navient,
the nation’s largest student loan lenders for engaging in illegal
and deceptive activities and failing borrowers at every stage of repayment.
Allegations against Navient include that it: (1) created obstacles to
repayment; (2) processed payments incorrectly; (3) failed to act when
borrowers complained; and (4) denied borrowers the right to lower repayments.
According to CFPB Director Richard 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
Navient was formerly part of Sallie Mae, Inc. and is the largest servicer
of federal and private student loans in the United States. The company
services the loans of more than 12 million borrowers. Of those 12 million
accounts, 6 million are under its contract with the Department of Education.
In total, it services more than $300 billion in federal and private student loans.
In addition to Navient, two of its subsidiaries, Navient Solutions and
Pioneer Credit Recovery, have also been named in this action. Navient
Solutions is a division responsible for loan servicing operations and
Pioneer Credit Recovery specializes in the collection of defaulted student
loans. Servicers play an important role in the relationship between borrowers
and lenders. Their responsibilities include: (1) managing borrowers’
accounts; (2) processing monthly payments; and (3) communicating directly
with borrowers. Additionally, borrowers often rely on their student loan
servicer to help them enroll in alternative repayment plans in the event
of financial hardship or unemployment.
In the present action, the CFPB alleges that Navient has failed to provide
the “most basic functions of adequate student loan servicing”
for both federal and private borrowers. The company has been specifically
charged with: (1) failing to correctly apply or allocate borrower payments
to their accounts; (2) steering struggling borrowers toward paying more
than required on loans; (3) obscuring information needed by consumers
to maintain their lower payments; (4) deceiving private loan borrowers
about the requirements for releasing their cosigners from the loan; and
(5) harming the credit of disabled borrowers, including severely injured
veterans. Furthermore, the CFPB alleges that Navient, through its subsidiary
Pioneer, made misrepresentations regarding the federal loan rehabilitation
program’s availability to defaulted borrowers. Additionally, it
misrepresented facts regarding the program’s ability to remove all
adverse information from the borrower’s credit report and the forgiveness
of collection fees.