After the Consumer Financial Protection Bureau received over 1,000 complaints against Navient from Pennsylvania residents, the state’s Attorney General Josh Shapiro recently filed a lawsuit against the largest student loan servicer in the country. According to Shapiro, the company was repeatedly involved in deceptive loan practices in the aim of profit while harming the interests of borrowers.
The attorney general referenced complaints gathered from 2004 to 2014. For a vast majority of that time span, Navient did not function independently since it was still a subsidiary of Sallie Mae.
With that being said, Navient was involved in risky loans to students with poor credit history at interest rates reaching 16 percent and fees up to nine percent.
Most of the borrowers studied in colleges with graduation rates as low as 50 percent which was yet another risk indicator ignored by Sallie Mae and Navient according to the Pennsylvania Attorney General.
In addition to that, Shapiro also claimed Navient put too many borrowers into short-term forbearance to postpone their repayments. On one hand, it resulted in less paperwork for the company, but on the other, it led to more interest accruing for borrowers.
When Sallie Mae and Navient split up in 2014, the latter acquired all the liabilities and 95 percent of the assets, including the servicing rights to $300 billion in student loans. Therefore, Navient would be the sole company in charge for any potential expenses or losses related to the court case.
Shapiro is going to sue Navient for $1,000 for each violation of the Consumer Protection Law. He also pledges civil penalties of $3,000 for each violation involving victims above 60 years of age. In addition to that, the Commonwealth is asking for $1,000,000 in third-tier civil penalties for each day the company breaks the law.
Shapiro is able to press charges against Navient in Pennsylvania because Navient has a Pennsylvania office employing 1,000 people in Wilkes-Barre.
This is the fourth pending lawsuit against the company in 2017. The Attorneys General in Illinois and Washington as well as the Consumer Protection Financial Bureau filed cases against this year. The cases were similar to the most recent PA development, and judges have already rejected Navient’s attempts to dismiss the charges.
Although at first sight, the case might seem local, Bloomberg suggested it would spread beyond the state. It might affect anyone who has had ever received loans from Sallie Mae and had experienced issues with repayment. Shapiro admitted his ultimate goal was to make sure that all the student loan recipients in the United States were well-protected.
In an official statement, Navient declined all the allegations and defined them as ”unfounded” and seeking nothing but media attention. The company also stated the authorities had not revised the credit files of Pennsylvania’s residents before filing the case in court.
Author: Dave Rathmanner
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