A federal consumer protection agency has sued the nation's largest student-loan servicing company for cheating borrowers, allegedly pushing them into higher interest rates and payments on federally backed loans.
The Consumer Financial Protection Bureau sued Navient, which services more than $300 billion in loans, for failing to advise borrowers of programs that would have saved them money. Instead, the agency said, Navient gave student borrowers inaccurate information, processed payments incorrectly, and steered them toward higher-cost repayment options.
"At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs," said agency Director Richard Cordray. "Too many borrowers paid more for their loans because Navient illegally cheated them, and today's action seeks to hold them accountable."
Billions in Charges
According to the complaint, the company hit borrowers with additional interest charges for a total of up to $4 billion by enrolling them in repeated forbearance plans from January 2010 to March 2015.
"For many of these borrowers, had they been enrolled in an income-driven repayment plan, they would have avoided much or all of their additional charges," the agency said in its complaint.
The agency issued a press releasing, saying that Navient failed to correctly apply or allocate payments to borrowers' accounts, steered borrowers to pay high rates than necessary, obscured information consumers needed to obtain lower payments, deceived borrowers about requirements to release co-signers from loans, and harmed the credit of disabled borrowers.
In its press release, Navient denied the charges and said they are politically motivated. The company called the complaint a "midnight filing" on the eve of a new administration.
"Navient has a responsibility to its customers, shareholders, and employees to defend itself -- publicly and in court -- against this unsubstantiated, unjustified and politically driven action," the company said. "We cannot and will not accept agenda-driven ultimatums designed to get headlines rather than help for student borrowers."
The complaint names Navient Corporation and two of its subsidiaries: Navient Solutions, which is a division responsible for loan servicing operations; and Pioneer Credit Recovery, which specializes in the collection of defaulted student loans.