Pennsylvania AG Josh Shapiro Sues Navient for ‘Unfair and Deceptive’ Practices

Navient

Navient Corp., which services more than 12 million student loan borrowers nationally, is under fire again — this time from a lawsuit filed by Pennsylvania Attorney General Josh Shapiro.

Shapiro contends that Navient engaged in unfair and deceptive practices to bilk student loan borrowers out of billions of dollars. For its part, Navient denies the allegations, insisting that it works within the confines of regulation set by Department of Education.

This lawsuit is the fourth filed against Navient in 2017. It also comes on the heels of Navient’s announcement that it will acquire education fintech company Earnest.

Why is Navient being sued?

Shapiro claims Navient engaged in practices designed to maximize profits while hurting consumers.

The Pennsylvania lawsuit is similar to the lawsuits filed earlier this year by attorneys general in Illinois and Washington. The Consumer Financial Protection Bureau (CFPB) also filed suit against Navient earlier this year.

The Pennsylvania attorney general makes three main claims in the lawsuit, which was filed in Pennsylvania Middle District Court:

  1. Navient made predatory loans to students attending schools with graduation rates of less than 50 percent, expecting students wouldn’t be able to repay their loans.
  2. Navient used a “baited hook” with subprime loans to become a preferred lender for many schools and increase its volume, even though it knew subprime student loan borrowers would likely default.
  3. After the implementation of income-driven repayment (IDR), Navient knowingly steered borrowers toward forbearance instead of counseling them about more affordable repayment plans.

“Navient’s deceptive practices and predatory conduct harmed student borrowers and put their own profits ahead of the interests of millions of families across our country who are struggling to repay student loans,” Shaprio said. “They crossed the line in pursuit of profit, and we’re here to change their behavior and help the people who’ve been harmed.”

Shapiro’s office seeks full restitution for borrowers affected by Navient’s practices and asks the company to give up profits made by the practices Shapiro says are unlawful.

The suit also asks Navient to delete negative credit information it gave to credit reporting agencies as a result of the disputed loans and to reform all affected loan agreements with Pennsylvania residents.

Navient fired back at the Pennsylvania attorney general in a press release: “The allegations are completely unfounded, and the case was filed without any review of Pennsylvania residents’ customer accounts.”

The company went on to insist that it abides by the rules set by Congress and the Department of Education when dealing with borrowers.

It also claimed that Navient-serviced borrowers are 37 percent less likely to default than those serviced by others and that 49 percent of the loans it services for the government are enrolled in IDR plans.

Could the Navient lawsuit in Pennsylvania have national impact?

Even though the Pennsylvania lawsuit against Navient isn’t breaking new ground, Adam Minsky, a student loan lawyer, said the outcome of this case could have nationwide impact.

“This third lawsuit against Navient from a state attorney general is an indication that states are ready to step in to defend consumers,” he said. “As the Department of Education rolls back consumer protections, we will probably see more states try to protect their citizens against the predatory practices.”

Navient isn’t the only student loan servicer in the crosshairs. Minsky pointed to other actions taken by states, including the lawsuit Massachusetts Attorney General Maura Healey filed against the Pennsylvania Higher Education Assistance Agency.

He also said Pennsylvania is of special interest because three of the five major servicers are based in the state. “If Pennsylvania is successful, lenders would have to change their behavior in ways that could benefit borrowers all over the country,” he pointed out.

The Pennsylvania lawsuit also sheds more light on the work of the CFPB. Minsky said Shapiro cited the more than 1,000 complaints Pennsylvania residents had lodged with the CFPB about Navient’s practices.

“Other states can access that data too and see if student loan borrowers are being negatively impacted by loan servicers,” Minksy said. “Who knows what’s next for the CFPB when the current director’s term is up and with some members of Congress attacking the independent agency?”

He thinks more of these suits could serve as insurance of sorts for the CFPB, drumming up public support for its work.

What can you do if you’re concerned about your student loan servicer?

Minsky said these actions by states and the CFPB aren’t class-action lawsuits, so you can’t sign up join them. However, there are ways you can take action if you think your student loan servicer isn’t giving you a fair shake.

“If you have a problem, file a complaint with the CFPB,” Minsky said. “It can result in actual relief for people, and at the very least, it provides support for broad enforcement actions.”

Next, Minsky suggested, file a complaint with the attorney general’s office in your state. You also can file a complaint with the Department of Education. However, with the Department of Education no longer sharing its data with the CFPB, you might need to file separate complaints.

Finally, Minsky said you can go straight to your servicer. However, you should be careful when you do so.

“To be brutally honest, there’s a decent chance the servicer won’t give you the information you need or that you will even get misinformation,” he said. “Understand what you’re eligible for, know your options, and then talk to the servicer. You’ll be better equipped to to deal with the situation.”

Minsky also recommended being persistent with your servicer and asking to escalate to supervisors who can help you. “Keep records of everything,” he advised. “Note all your conversations, keep all your payment histories, and file any disputes in writing as well as over the phone.”

You also can get help from a student loan ombudsman to work through issues with your servicer.

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