The Consumer Financial Protection Bureau is suing Navient, the country’s largest servicer of federal and private student loans, for failing borrowers during every stage of repayment, the federal agency said on Wednesday in a news release.
In the lawsuit, which seeks undisclosed damages, the bureau states that Navient violated the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Credit Reporting Act, and the Fair Debt Collections Practices Act.
Navient provided borrowers with bad information, processed payments incorrectly, and did not take action when borrowers complained, the release said. The company, formerly part of Sallie Mae, is further accused of using shortcuts and deception to illegally cheat borrowers out of their right to lower their repayments.
The release also stated that Navient had deceived private-student-loan borrowers about the requirements to release co-signers from loan responsibility.
Navient is also accused of harming the credit of disabled borrowers, including severely injured veterans. Borrowers with severe disabilities, including veterans who were disabled as a result of military service, can seek loan forgiveness. But when borrowers took advantage of that option, the consumer bureau asserts, Navient erroneously reported to credit-reporting agencies that the disabled borrowers had defaulted on their loans.
“At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs,” Richard Cordray, director of the federal consumer bureau, said in the release. “Too many borrowers paid more for their loans because Navient illegally cheated them, and today’s action seeks to hold them accountable.”
The government agency did not give a sum for which it is suing Navient, saying only that it seeks “to recover significant relief for the borrowers harmed by these illegal servicing failures.”
Navient responded to the accusations in a news release stating that the bureau wanted to impose improper penalties based on new student-loan servicing standards that were being applied retroactively and against one servicer.
“The allegations of the Consumer Financial Protection Bureau are unfounded, and the timing of this lawsuit — midnight action filed on the eve of a new administration — reflects their political motivations,” reads the release.
