By Sarah Lewis & Rob McGarrah, AFL-CIO
The Consumer Financial Protection Bureau and the attorneys general of Illinois and Washington directed the spotlight on the country’s largest student loan servicer, Navient, in a federal lawsuit filed last week. And the multibillion-dollar corporation is not happy about that.
CFPB, tasked with protecting consumers from banks and other financial institutions, said in a press release:
Navient has failed to provide the most basic functions of adequate student loan servicing at every stage of repayment for both private and federal loans. Navient provided bad information in writing and over the phone, processed payments incorrectly, and failed to act when borrowers complained about problems. Critically, it systematically made it harder for borrowers to obtain the important right to pay according to what they can afford. These illegal practices made paying back student loans more difficult and costly for certain borrowers.
The AFL-CIO, as an institutional investor, has repeatedly warned Navient that internal regulatory compliance failures could lead to such consequences, and this isn’t the first time the former loan servicing unit of Sallie Mae has been in trouble with the law. In 2014, the company paid millions to settle claims that the company cheated active-duty service members. That same year, the CFPB released a report finding that Sallie Mae, now called Navient, was putting private student loan borrowers in “auto-default” when loan co-signers died. And in 2015, the Department of Education ended defaulted loan collections contracts with Pioneer Credit Recovery, a debt collector owned by Sallie Mae, for misleading borrowers.
Despite a clear pattern, Navient has gone on a PR blitz, accusing the CFPB of singling it out for enforcement and saying that rules and regulations governing student loan servicing are the real problem. Further, Navient claims the CFPB’s suit is politically motivated and that CFPB had an ultimatum to settle the lawsuit before Donald Trump’s inauguration.
Did you catch that last bit? Navient thinks the CFPB will lose its ability to enforce consumer protection laws now that Trump sits in the White House.
Navient is known to be an aggressive lobbyist of the Department of Education, Congress and state governments. Unsurprisingly, its stock went up significantly after the election of anti-regulation politicians last year. Considering the GOP’s attacks on the CFPB in recent weeks, it’s pretty clear that it’s Navient who is acting with a political motive, adding fuel to the GOP’s attacks.