General Discussion

TransitJohn

(6,932 posts) Thu Jan 19, 2017, 01:28 AM Jan 2017

The federal government just filed suit against Navient, claiming they scammed millions of borrowers

between 2010-2015 to the tune of $4 billion. This is huge.

I'm cross posting from the r/personalfinance subreddit. All credit to original poster.

The suit was filed January 18th 2017, by the Consumer Finance Protection Bureau (CFPB) against Navient.

First, know that the CFPB has requested that the Court order Navient to comply with the following actions, among others:

Restitution to consumers harmed by Navient's conduct;

Disgorgement of all ill-gotten revenue

Here are the details of the allegations:

From consumer affairs .com:

Specifically, the suit charges that Navient:

Fails to correctly apply or allocate borrower payments to their accounts;

Steers struggling borrowers toward paying more than they have to on loans;

Obscured information consumers needed to maintain their lower payments;

Deceived private student loan borrowers about requirements to release their co-signer from the loan; and

Harmed the credit of disabled borrowers, including severely injured veterans.

From the LA Times:

In its lawsuit, the consumer agency alleged many other borrowers had problems enrolling in programs to reduce payments and Navient instead steered struggling borrowers into plans that made more money for Navient but saddled borrowers with higher costs.

Specifically, the government alleged that Navient maintained compensation policies that encouraged customer service representatives to push borrowers into forbearance, which allows borrowers to suspend payments without defaulting but does not stop interest from accruing.

However, most federal student-loan borrowers earned the right in 2009 to enroll in the less costly payment options that are based on their income.

Although those plans save borrowers money, forbearance was more lucrative for Navient, the agency alleged because the company could enroll borrowers in forbearance in less time and with less staff.

In all, the servicer slapped borrowers with additional interest charges of up to $4 billion by enrolling them in repeated forbearance plans from January 2010 to March 2015, according to the consumer agency.

If you want to learn more about this, I highly encourage you to read the original complaint filed with the court by the CFPB. It is VERY readable (not filled with legalese) and reads as an absolutely scathing indictment of a company whose business practices targeted its most vulnerable customers in flagrant violation of the law.

You can find the original complaint on the consumer finance .gov website. They also summarized the complaint on their website.