In response to a lawsuit filed by the Consumer Financial Protection Bureau (CFPB) against Navient, see Navient Sued by CFPB for Failing All Student Loan Borrowers, the company has said they don’t have to provide good advice.
To prepare yourself to digest this article, you need to know the definition of the word fiduciary. A fiduciary is someone who “is a person or organization that owes to another the duties of good faith and trust. The highest legal duty of one party to another, it also involves being bound ethically to act in the other’s best interests.” – Source
In court documents Navient states they are not paid to provide best advice when it comes to dealing with student loans. They say they are not paid to “spend time providing individualized financial advice to borrowers unable to pay their debts.”
Navient then goes on to say they specifically do not provide people with good advice because “Borrowers could not reasonably rely on Navient to counsel them into alternative payment plans unless Navient had an affirmative duty to provide such individualized financial counseling. But the law imposes no general duty to provide information without some fiduciary relationship.”
Yes, that’s correct. Navient is stating they have no duty to provide student loan debtors with advice that could help them, even though the Department of Education says debtors should talk to their loan servicers for advice and help.
Navient then goes on to explain why they don’t provide balanced advice to student loan debtors.
- “Navient’s relationship with borrowers is that of an arm’s-length loan servicer, not a fiduciary counselor. A servicer’s role is to collect payments owed by borrowers. In that role, the servicer acts in the lender’s interest (here that lender is often the federal government itself), and there is no expectation that the servicer will “act in the interest of the consumer.” Courts therefore routinely hold that servicers and lenders “do not owe borrowers any specific fiduciary duties based upon their servicer/borrower relationship.”
- “The Complaint identifies no statute or other regulatory or contractual requirement that imposes a duty on Navient to provide financial counseling to borrowers.”
- “The Complaint does not allege any conduct or statements by Navient that somehow transformed its arm’s-length relationship with borrowers into a fiduciary one. The CFPB points to four statements on Navient’s website that allegedly induced borrowers to rely on Navient to act in their interests—all general statements that Navient would “work with” borrowers or “help” them find an affordable repayment option. But publicly disseminated statements reaching millions of borrowers cannot create a fiduciary-type relationship or obligation. Moreover, even if the statements had been made to individual borrowers, general pronouncements by a lender or servicer to borrowers that “we can work with you” or “help” do not create a fiduciary relationship.”
It seems the position Navient takes is one where consumers should have known not to depend on Navient to offer best advice and instead to put the profit motives ahead of everything else.
Navient then goes on to blame consumers for thinking Navient would help them. They say consumers should have known better than to rely on Navient because people had access to other advice options. For example, for the issue of Navient putting people into forbearance when it was not in their best interest, Navient says, “Here, the alleged injury—borrowers entering forbearance without considering alternative repayment plans—was entirely “avoidable” because federally mandated notices and other disclosures provided borrowers with the necessary information to make a “free and informed choice” regarding forbearance and alternative repayment options.” – Source
So here is the bottom line, student loan debtors remain lost in the void. Many student loan assistance companies don’t provide best advice using the same argument as Navient. They don’t feel they have a duty to provide fiduciary advice, just sell you a product.
The Department of Education directs people to talk to their loan servicers if they are having money troubles with student loan payments, but Navient says they don’t have the obligation to provide good advice. So what are people to do? Unless someone is willing to do deep research how to beast deal with their loan situation, or call someone like Damon Day, then the only real option is faith and prayer.
Little guy gets screwed again.