On January 18, the CFPB and the state attorneys general for Illinois and Washington filed three separate enforcement actions against Navient Corporation and its related entities for violations of a number of consumer protection laws.  Navient is the largest student loan servicer in the United States, servicing the loans of more than 12 million borrowers, accounting for more than $300 billion in federal and private student loans. 

“For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans,” CFPB Director Richard Cordray said in a statement.  “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 and today’s action seeks to hold them accountable.”  Illinois Attorney General Lisa Madigan added, “My investigation found [the company] put student borrowers into expensive subprime loans that it knew were going to fail.  Navient’s actions have led to student borrowers needlessly carrying billions of dollars in debt and the company must be held accountable.” 

The complaints allege that Navient routinely provides bad information to its customers, processes payments incorrectly, and fails to act when borrowers complain about problems.  According to the complaints, Navient repeatedly misapplies or misallocates borrowers’ payments and fails to correct these errors unless contacted by borrowers.  Additionally, the Bureau and AGs contend that Navient regularly steers borrowers into forbearance, which offers a short break from repayment plans, yet interest continues to accrue during the forbearance period.  From January 2010 to March 2015, Navient added almost $4 billion in interest charges to the principal balances of those borrowers who were enrolled in multiple, consecutive forbearances. 

The CFPB and AGs also argue that Navient often obscures information borrowers need to maintain lower payments.  Consumers who are enrolled in income-driven repayment plans must recertify their income annually, but Navient’s renewal notices failed to inform borrowers adequately of critical deadlines.  Many borrowers did not renew their enrollments on time and, as a result, lost their affordable monthly payments and other account protections, including interest subsidies and progress toward loan forgiveness. 

Navient responded to the Bureau’s action and questioned the timing of the filing.  “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.”  Navient also released a Fact Sheet that responds to many of the CFPB’s allegations. 

We will continue to monitor the CFPB and state AG actions related to student loan collection.