Are You Apart of this Student Loan Lawsuit that Cheated People Out Of Money?

Navient, formerly known as Sallie Mae, oversees about $300 billion in student loans owed by 12 million borrowers.

You may know Navient Corp. as the student loan company formerly known as Sallie Mae. Although Navient Corp. is currently the country’s largest student loan company, it is still vulnerable to being policed for swindling people.

Navient is being sued by the Consumer Financial Protection Bureau for allegedly misleading students, bungling payment processing and cheating borrowers out of lower repayment rates in favor of its own bottom line, according to Buzzfeed News.

According to the CFPB’s lawsuit they are seeking financial relief for millions of student borrowers. The total sum of the payment could potentially reach billions of dollars, officials said in a press call.

The most shocking of the allegations is the claim that Navient purposely pushed low-income borrowers away from income-based repayment plans and into a quick, short-term solution known as forbearance. This ultimately costs consumers more interest.

“Navient chose to subvert its obligations as a servicer in favor of shortcuts,” said Richard Cordray, the CFPB’s director.

In a statement on its website, the company dismissed the CFPB’s allegations, saying, “The timing of this lawsuit — midnight action filed on the eve of a new administration — reflects their political motivations.”

However, attorneys general in Illinois and Washington State also announced lawsuits against Navient and Sallie Mae. In their suits, they allege the companies had operated an illegal subprime lending scheme and debt collection violations.

Coincidentally, Navient was one of a number of companies whose stock quickly rose days after the election of Donald Trump. Many believe that the Trump administration will work to privatize the federal loan system and offer a business-friendly regulatory environment.

Here are five interesting points about the lawsuit:

  • What’s really got people upset is the late fee, five percent of the payment amount not received or $5.00 (whichever is larger), which the lawsuit says is inappropriate because it is not “compensatory” but instead “punitive.” The lawsuit says although the fee is intended to compensate the lender, it instead makes money from it. “Sallie Mae’s revenue from late fees far exceeds the costs it incurs as a result of late payments,” according to the lawsuit.
  • The CFPB believes that the company intentionally obscured the information that borrowers needed to have and pointed them toward forbearance, meaning they would be allowed to stop making their payments for a short time, but interest on the loans continues to accrue. The agency says as much as $4 billion were added up to principal that borrowers already had.
  • Timing is everything. The lawsuit was filed two days before the inauguration of President-elect Donald Trump. This has raised eyebrows regarding the political tug-of-war surrounding both the CFPB and Navient. The consumer watchdog agency was created with the financial overhaul law that came after the 2008 economic crisis, and has been prodded by Republicans ever since. On the other hand, Navient gave more than 62 percent of its political donations to people linked to the GOP in 2015-16, according to Forbes.
  • But none of this is new at all. The CFPB and the Illinois and Washington attorney generals offices have been investigating this issue for at least two years. Multiple depositions and interviews of Navient executives and scrutiny of company documents led to the filing of the lawsuit. In fact, several states have investigated the lending practices of Navient for violating state laws.
  • Still, Navient denies everything. In fact, they defended their practices in a statement. “The timing of this lawsuit — midnight action filed on the eve of a new administration — reflects their political motivations,” the company stated. “We cannot and will not accept agenda-driven ultimatums designed to get headlines rather than help for student borrowers. We will vigorously defend against these false allegations and continue to help our customers achieve financial success.”

Source: Rachel Herron and Ebony

(Photo: aldomurillo/Getty Images)

 

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