The Consumer Financial Protection Bureau (CFPB) is suing Navient Corp (NASDAQ:NAVI), a student loan management company, for alleged illegal activity.
- The student loan lawsuit claims that the company failed to properly allocate or apply borrower payments.
- Allegations against the company claims it has done this multiple times and doesn’t fix the issue unless a customer points out the problem.
- The company also allegedly steers borrowers away from repayment plans with lower monthly payments.
- Borrowers of federal student loans have a right to these plans, but the company may have tried to force them into forbearance instead.
- This allows customers to take a break from paying back their loans, but interest continues to accumulate during this time.
- The CFPB also claims that NAVI purposefully made it hard for customers to renew lower payment plans by obscuring information.
- This may have caused increased monthly payments, a lose of interest subsidies and progress made toward loan forgiveness.
- Navient Corp also allegedly deceived borrowers about requirements for releasing their co-signers from their loans.
- The company let borrowers pay loans in advance, but would then reset the counter for co-signer release when monthly payments weren’t made.
- The CFPB also alleges that NAVI hurt the credit of some of its federal loan borrowers with disabilities.
- Borrowers with disabilities are allowed to seek loan forgiveness through the Total and Permanent Disability discharge program.
- However, Navient Corp told credit company’s that loans forgiven in this way were defaulted.
- This allegedly led to the credit score of some of the company’s borrowers being hurt.
“At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs,” Richard Cordray, Director of the CFPB, said in a statement. “Too many borrowers paid more for their loans because Navient illegally cheated them and today’s action seeks to hold them accountable.”
NAVI stock was down 2% as of Noon Thursday.