The Consumer Financial Protection Bureau said Thursday it is suing student loan servicer Navient, saying the company failed borrowers through creating obstacles to repayment. Image by ShaunWilkinson/Shutterstock
Jan. 19 (UPI) -- The government Consumer Financial Protection Bureau announced a lawsuit against student loan servicer Navient, saying the company deceived customers.
Navient, formerly part of the Student Loan Marketing Association, or Sallie Mae, services more $300 billion in federal and private student loan debt for over 12 million borrowers.
In a statement Thursday, the CFPB accused Navient of "systematically and illegally failing borrowers at every stage of repayment."
"For years, Navient, formerly part of Sallie Mae, created obstacles to repayment by providing bad information, processing payments incorrectly, and failing to act when borrowers complained. Through shortcuts and deception, the company also illegally cheated many struggling borrowers out of their rights to lower repayments, which caused them to pay much more than they had to for their loans," the statement said.
The CFPB said the majority of federal student loan borrowers qualify for income-based repayment plans, which can dramatically lower monthly payments, but that Navient provided bad and inadequate information and "systematically made it harder for borrowers to obtain the important right to pay according to what they can afford. These illegal practices made paying back student loans more difficult and costly for certain borrowers."
The agency did not specify the damages it seeks, except to say it wants to "recover significant relief for borrowers harmed by these illegal servicing features" through restitution, a return of "ill-gotten revenue" and financial penalties.
The lawsuit came two days before the start of a Republican-led administration in Washington. The GOP has long expressed a desire to constrain, or even eliminate, the work of the CFPB, Forbes reported Thursday. In light of President-elect Donald Trump's inauguration Friday, Navient called the lawsuit an unfair ultimatum, noting that 49 percent of the loan balances it services are in the income-based repayment programs.