Summary: One of the country’s largest student loan service companies has been accused of misleading borrowers.
As if we needed another reason to hate student loan companies. On Wednesday, a lawsuit filed by the Consumer Financial Protection Bureau accused one of the nation’s largest student loan service providers of lying to borrowers in order to drive up their debts, according to The New York Times.
Student loan servicer, Navient, handles the loans of almost 12 million people. This week, they were accused of misleading borrowers and intentionally making mistakes during the collection process in order to gain more profit. Examples of their alleged bad deeds include mishandling payments and burying details such as how students can lower their rates in fine print. These actions led to Navient illegally driving up loan repayments.
Richard Cordray, the director of the consumer bureau, told The New York Times that Navient “used shortcuts and deception to illegally cheat struggling borrowers out of their rights to lower payments. These unlawful practices have cost student loan borrowers across the country both heartache and money.”
The consumer bureau and two state attorney generals filed the lawsuit against Naviet, which handles $300 billion in loans. For an additional perspective of how far Naviet’s reach is, the loan service company is in charge of 25% of all federal and private loans taken by students. It’s noted that Naviet does not provide the money, but it holds lucrative contracts to collect payments on the behalf of banks and lenders. In 2014, it split from another litigation-magnet, Sallie Mae, which faced its own similar lawsuit.
According to Illinois attorney general Lisa Madigan, Navient’s fraudulent deeds may have touched every one of its customers. She said that the damages the government is seeking could be in the billions of dollars.
Navient, however, has denied any wrongdoing. Despite the lawsuit, it will continue to hold a government contract to service student loans until 2019.
“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 administration — reflects their political motivations,” Patricia Nash Christel, a company spokeswoman, said to the New York Times. “We will vigorously defend against these false allegations.”
Source: The New York Times
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