Sept. 12 (UPI) — The Consumer Financial Protection Bureau said Thursday that student loan servicing company Navient will be banned from servicing federal direct loans and must pay $120 million for what the agency called years of failures and lawbreaking that abused borrowers.
Navient must pay a $20 million penalty and provide another $100 million to redress the harm done to borrowers. The order also bars Navient from directly servicing or acquiring most loans in the Federal Family Education Loan program.
“For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” said CFPB Director Rohit Chopra in a statement. “By banning the notorious student loan giant from federal student loan servicing and ensuring the wind down of these operations, the CFPB will finally put an end to the years of abuse.”
According to the CFPB, Navient used illegal actions that steered student loan borrowers into costly repayment options, and illegally deprived student borrowers of opportunities to enroll in more affordable loan repayment plans.
“While we do not agree with the CFPB’s allegations, this resolution is consistent with our go-forward activities and is an important positive milestone in our transformation of the company. Navient is no longer a servicer or purchaser of federal student loans,” Navient said in a statement.
Navient said it has transferred government student loans to a third party and earlier this year reached an agreement to outsource student loans the company held under the FFELP program.
Navient, formerly part of Sallie Mae, was the biggest student loan servicer in the United States in 2017 when the CFPB filed a lawsuit against the company alleging misconduct.
That suit alleged that Navient cheated borrowers out of repayment rights using deception.
The CFPB said it sued Navient for failing borrowers at every stage of repayment.
“The lawsuit alleges that Navient steered borrowers who may have qualified for income-driven repayment plans into forbearance instead,” CFPB’s statement said. “This practice was cheaper and simpler for Navient, but detrimental to borrowers. By steering struggling borrowers into forbearance — where interest continues to accrue and capitalize — Navient’s illegal actions led numerous borrowers to pay additional interest charges.”
According to the CFPB, Navient violated the Consumer Financial Protection Act, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act.
“I applaud the CFPB for obtaining concrete relief for borrowers and deterring similar failures in the future,” said U.S. Under Secretary of Education James Kvaal in a statement.
