in Newswire Published on September 20, 2022

Navient Solutions Unlawfully Misapplied Loan Payments, Class Action Claims

Botello v. Navient Solutions, LLC

Filed: September 16, 2022 ◆§ 2:22-cv-05601

A proposed class action claims that Navient Solutions has misapplied loan payments to profit from higher interest rates.

Defendant(s)

Navient Solutions, LLC

Law(s)

State(s)

A proposed class action claims that Navient Solutions has misapplied loan payments to profit from higher interest rates.

According to the 11-page complaint, the student loan servicer has violated the federal Fair Credit Reporting Act and the New Jersey Consumer Fraud Act by systematically applying loan payments to accounts with lower interest rates to ensure greater profit.

As the suit tells it, the plaintiff, a New Jersey resident, has used Navient to service several loans, each with different interest rates. The case relays that the plaintiff sought to pay off accounts with higher interest rates first and, intending to pay off a higher interest loan, issued a check to Navient for the exact payoff amount. However, despite the payment in full, Navient still reports a balance of over $8,000 in the plaintiff’s account, the lawsuit alleges.

Per the complaint, Navient applied the payment to different accounts with lower interest rates instead of the account the plaintiff intended to pay off. The case argues that Navient “has a strong financial interest in preventing student loan debtors from paying additional interest more quickly than scheduled” because the company profits from higher interest rates.

The case asserts that this is “part of a systemic attempt” to misapply loan payments for profit, namely by splitting a borrower’s payment across multiple loans before even touching the outstanding principal.

“Defendant actively seeks to prevent student loan debtors from making payments to a specific loan, even when a debtor directs a payment to a specific one. To this end, Defendant will split the single payment across a debtor’s multiple loans, applying that payment to all of the debtor’s interest due, before applying the difference of the payment amount to outstanding principal.”

The case alleges Navient has run afoul of the New Jersey Consumer Fraud Act, a state law which prohibits businesses from using deceptive methods to sell goods or services to consumers.

Further, Navient failed to conduct a reasonable investigation after the plaintiff filed a dispute with credit reporting agencies over the “erroneous balance,” the lawsuit continues. The case also alleges that Navient supplied these agencies with false and misleading information about the plaintiff. According to the complaint, these practices violate the Fair Credit Reporting Act.

The lawsuit looks to cover all consumers who have been subject to the same alleged misapplication of funds by Navient towards loans with lesser interest rates.

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