CFPB Hits Navient with Lawsuit: Here's What You Need to Know

Within the last 24 hours, ClassAction.org has received many questions from our readers regarding the latest developments with a massive lawsuit filed by the Consumer Financial Protection Bureau against Navient, the largest student loan servicer in the United States. In a statement published on the agency’s website on January 18, Consumer Financial Protection Bureau director Richard Cordray summed up the key allegations made by the lawsuit:

"For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans,” Cordray said. “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.”

So, Here’s Where We Are…

Before its wings potentially get clipped by the incoming president-elect, the Consumer Financial Protection Bureau (CFPB) filed a lawsuit Wednesday against defendants Navient Corporation, Navient Solutions, Inc. and Pioneer Credit Recovery, Inc. The lawsuit, lodged in Pennsylvania district court, claims Navient broke numerous federal laws by failing “to perform its core duties in the servicing of student loans” and took advantage of borrowers’ trust in the process.

These are some serious allegations – especially considering Navient reportedly services 12 million borrowers’ loans, including more than six million accounts under a contract with the U.S. Department of Education, which total upward of $300 billion in federal and private student loans.

What Does the Suit Say Navient Did Wrong?

For starters, the 66-page lawsuit claims Navient, formerly known as Sallie Mae, “systematically” deterred borrowers from access to “some or all of the benefits and protections” offered by the company’s loan payment plans. Navient’s practices, the lawsuit argues, stand in stark contrast to the level of service and care borrowers, particularly those facing economic hardships, were promised.

“Despite assuring borrowers that it would help them find the right repayment option for their circumstances, Navient steered these borrowers experiencing financial hardship that was not short-term or temporary into costly payment relief designed for borrowers experiencing short-term financial problems, before or instead of affordable long-term repayment options that were more beneficial to them in light of their financial situation,” the lawsuit alleges.

On top of this allegation, the lawsuit says Navient never disclosed to individuals who enrolled in long-term repayment plans the annual deadline to renew those plans. Further, Navient allegedly “misrepresented” the consequences of not renewing long-term repayment plans and “obscured” its renewal notice to borrowers. These actions, the CFPB claims, caused the affordable payment amount for hundreds of thousands of borrowers to expire, which then led to an immediate spike in their monthly payment total.

The complaint continues to paint a picture of Navient as a predatory agency that went beyond merely failing to disclose or obscuring information borrowers needed to know. In what’s perhaps the most egregious claim put forth by the lawsuit, Navient allegedly misreported information to consumer agencies about thousands of permanently disabled borrowers, including military veterans who were disabled during the course of duty, harming the individuals’ credit.

To achieve this, Navient allegedly made it seem as if veterans who borrowed loans had defaulted on those loans when, in truth, they had not. To this point, Navient also allegedly denied or delayed access to “an important feature on many cosigned private loans” that would relieve a co-signer of responsibility once the borrower met certain benchmarks by intentionally misrepresenting key requirements.

What Does This Mean for Consumers?

I know. The suit is a lot to digest – and we really only skimmed the surface here. But what consumers really need to know is what could happen if the suit is successful.

The case seeks to order Navient to pay “appropriate restitution” to consumers who have been harmed by the company’s conduct. What this means is, somewhere down the road, consumers could see some level of monetary compensation as a result of Navient’s allegedly heinous business methods. It’s worth noting the lawsuit also seeks to:

So, How Do I Sign Up?

It’s important to note that this case is not a class action you can sign up for. This is an action where the government is directly suing a company to hopefully provide some relief for injured consumers. It’s possible that the case could eventually reach a settlement – and, if it does, we’ll be sure to report on it here. But, with all lawsuits, these things take time. Check back soon for updates.

For more information on this lawsuit, check out the CFPB’s official statement on the case, which includes a detailed a breakdown of the allegations waged against Navient. The full complaint can be read below.