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 them.”
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.