On January 18, 2017, the Consumer Financial Protection Bureau (CFPB) filed a lawsuit against Navient Corporation and two of its subsidiaries, Navient Solutions and Pioneer Credit Recovery (collectively, Navient).

The CFPB complaint–which was filed in federal district court in Pennsylvania–alleges that Navient

  • Failed to apply or allocate borrower payments accurately to their accounts;
  • Directed struggling borrowers into forbearance, rather than allowing them to lower their monthly payments, resulting in unnecessary interest;
  • Failed to inform borrowers adequately about steps they needed to take to maintain their low monthly payments;
  • Deceived borrowers about the requirements necessary to release their co-signer from the loan; and
  • Harmed disabled borrowers’ credit, by misrepresenting information to credit reporting companies about borrowers that were entitled to seek loan forgiveness under the federal Total and Permanent Disability discharge program.

The CFPB’s complaint seek monetary redress from Navient for harm allegedly caused to borrowers as well as an injunction to prevent Navient from engaging in similar conduct in the future.

This lawsuit follows multiple warnings by the CFPB over the course of the last few months related to student loans. In fact, the CFPB has recently predicted substantial student loan defaults and just last month it issued a report that examined student loan complaints from older student loan borrowers.

The CFPB has made clear that it will focus on student loan related enforcement. As such, it is important that companies that are involved in the student loan industry (loan origination, servicing, or debt collection) confer with experienced CFPB counsel to ensure that their practices are in compliance with CFPB expectations.

For more information on my recent post concerning the risks to the student loan industry click here.