Consumer agency sues student loan giant Navient
File photo taken in 2014 shows local officials and Navient leaders unveiling a new sign for the company in Pennsylvania.
The nation's largest student loan servicer was hit with a Consumer Financial Protection Bureau lawsuit Wednesday over allegations that it has "systematically and illegally" failed borrowers.
The company also cheated borrowers out of their rights to lower repayments, according to the CFPB lawsuit, which seeks financial relief for student borrowers who were harmed.
"For years, Navient failed consumers who counted on the company to pay back their student loans," said CFPB Director Richard Cordray. "At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs."
Navient services the loans of more than 12 million borrowers, including more than six million accounts under a contract with the U.S. Department of Education. In all, the company services more than $300 billion in federal and private student loans.
The CFPB civil action also targets Navient Solutions, a company division responsible for loan servicing, and Pioneer Credit Recovery, a subsidiary that specializes in collections on student loans that fall into default.
"The allegations of the Consumer Financial Protection Bureau are unfounded, and the timing of this lawsuit — midnight action filed on the eve of a new (U.S. presidential) administration — reflects their political motivations, Navient said in a statement issued in response to the legal action.
"Navient welcomes clear and well-designed guidelines that all parties can follow, and we had hoped our extensive engagement with the regulators would achieve this objective," the Delaware-based company said. "Instead, the suit improperly seeks to impose penalties on Navient based on new servicing standards applied retroactively and applied only against one servicer. The regulator-asserted standards are inconsistent with Department of Education regulations, and will harm student loan borrowers, including through higher defaults."
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