On Wednesday, the Consumer Financial Protection Bureau sued Navient Corp., the country's largest servicer of student loans, claiming the company violated several acts and went out of its way to cheat borrowers.
"For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their students loans," CFPB Director Richard Cordray said in a statement. "At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them and today's action seeks to hold them accountable." Navient, formerly part of Sallie Mae, services private and federal loans worth more than $300 billion for more than 12 million borrowers.
The CFPB alleges that Navient misapplied or misallocated borrowers' payments, and incentivized customer service representatives to push borrowers into forbearance as opposed to income-based repayment plans, which racked up additional interest charges of up to $4 billion from January 2010 to March 2015. The agency also claims Navient violated the Fair Credit Reporting Act, the Fair Debt Collections Practices Act, and the Dodd-Frank reform act, and allegedly told credit reporting agencies disabled Americans defaulted on their loans, when really they were discharged under a special program, the Los Angeles Times reports. Navient called the allegations "unfounded."