In the short time since Navient – the nation’s largest student loan servicing company – spun off from Sallie Mae, the company has come under scrutiny for it allegedly unfair practices of overcharging and imposing excessive fees on consumers’ loans. While those practices resulted in a $97 million settlement with the Depts. of Education and Justice, and the Federal Deposit Insurance Corp, they could soon lead to a lawsuit from the Consumer Financial Protection Bureau.
Navient revealed in a Securities and Exchange Commission filing [PDF] on Monday that the company’s wholly-owned subsidiary Navient Solutions Inc. (NSI) could soon be party to a lawsuit regarding its servicing practices.
According to the filing, Navient received a letter from the CFPB on August 19 serving as notification that the regulator’s enforcement office is considering recommending legal action against the loan servicing company.
The letter relates to the agency’s ongoing investigation into Navient’s “disclosures and assessment of late fees and other matters,” and stated that “in connection with any action, the CFPB may seek restitution, civil monetary penalties and corrective action against NSI.”
Known as a Notice and Opportunity to Respond and Advise (NORA), the CFPB letter is intended to give Navient the opportunity to present its positions to the CFPB before an enforcement action is recommended or commenced, something the servicing company plans to do.
“NSI continues to believe that its acts and practices relating to student loans are lawful and meet industry standards and, where applicable, the statutory or contractual requirements of NSI’s other regulators,” Navient said in the SEC filing. “The company is committed to resolving any potential concerns.”
Navient, which was spun off from Sallie Mae in 2014, has faced several probes by federal and state agencies, including increased scrutiny over its contract with the government.
Earlier this month, a group of senators sent a letter to Inspector General Kathleen Tighe raising concerns that the Dept. of Education’s probe into its student loans servicer’s compliance with the Servicemembers Civil Relief Act (SCRA) was riddled with problems.
The Dept. of Education’s review, which was released in May, found that less than 1% of servicemember files serviced by Navient, Great Lakes, Nelnet and American Education Services contained violations of SCRA, including a provision that limits the amount of interest on military personnel student loans to no more than 6%.
Those findings were in contrast with a May 2014 investigation by the Depts. of Education and Justice, and the Federal Deposit Insurance Corp.. Those agencies jointly announced a sizable settlement against both Sallie Mae and Navient for overcharging and imposing excessive fees to nearly 78,000 military members.
The two companies agreed to pay a combined $97 million to settle charges that they violated the Servicemembers Civil Relief Act which caps loan interest rates at 6% for active duty military members.
The Huffington Post points out that the New York Department of Financial Services, along with the attorney general’s offices in both Washington and Illinois have launched investigations into the company’s debt collection practices.
[via The Huffington Post]