On Sept.12, the Consumer Financial Protection Bureau filed a proposed order for the complaint made in 2017 against Navient Corporation and its subsidiaries, citing several violations and failure to protect consumer rights.
CFPB’s actions may result in Navient’s ban from the federal student loan market and any consumer-facing servicing activities in the Federal Family Education Loan Program. Along with the ban, Navient has also settled to pay $100 million to its impacted student loan borrowers and $20 million in Civil Penalty Fund to consumers who were harmed by Navient’s actions.
Navient, previously Sallie Mae, was the largest student loan servicer in the U.S., with over $12 million in borrower accounts, including $6 million in federal student loan accounts through its agreement with the Department of Education.
Starting in 2017, Navient was investigated for its illegal actions that led to many borrowers being misled on the details of income-driven repayment plans and its advertising tactics of improving credit scores. These actions led numerous borrowers into expensive forbearances, higher interest rates in monthly payments and negative credit reports for years.
“To keep costs low, Navient encouraged its employees to push borrowers into forbearance, a much quicker and cheaper option for the company,” Rohit Chopra, director of CFPB, told MarketWatch on a conference call with reporters. “This approach allowed Navient to process more calls in less time and get people off the phone.”
With accumulating lawsuits and criticism from consumers, victims and lawmakers, Navient stopped servicing federal student loans in 2021, concluding its contract with the DOE. Earlier this year, CFPB violated the Consumer Financial Protection Act, the Fair Credit Reporting Act and the Fair Debt Collection Practices Act.
“For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” Chopra said. “By banning the notorious student loan giant from federal student loan servicing and ensuring the winddown of these operations, the CFPB will finally put an end to the years of abuse.”
In reaction to CFPB’s statements, Navient expressed that, while it does not agree with CFPB’s allegations, the resolution is an important milestone in the “transformation of the company.”
The influence of Navient’s settlement may cause millions of university students to look for a new liable student loan servicer. With a failure model from Navient, which is no longer a major student loan agency, students could worry about the security of their loans.
