The behemoth student loan originator and servicer Navient was sued by the Consumer Financial Protection Bureau (CFPB) for basically providing bad service and advice to six million student loan debtors it is contracted to serve for the Department of Education.
This horrible advice extended the time in debt and cost of repayment. Navient’s defense is the contract they signed with the Department of Education was about collecting money and they did not have to provide competent advice. So Navient wanted the lawsuit tossed out of court.
The Judge in the case wrote a 60 page Opinion on the issue and didn’t find the position taken by Navient to be persuading.
Judge Mariani noted that although Navient says they have no duty to provide fiduciary assistance to consumers they service, Navient itself publishes information and statement for the general public, encouraging them to contact Navient for advice and assistance with their loans. On the Navient website they say “If you’re experiencing problems making your loans payments, please contact us. Our representatives can help you by identifying options and solutions, so you can make the right decision for your situation.”
One issue Navient has been accused of is pushing debtors into forbearance plans which only inflate the balance owed rather than into income driven repayment plans. This appears to be a factual statement and it is created more because of an internal Navient policy than following their own public facing advice to debtors.
The Judge wrote, “Nevertheless, entering a borrower into an income-driven repayment plan is more time-intensive and expensive for Navient Solutions then putting a borrower’s loan into forbearance. While a Navient Solutions customer service representative can put a borrower’s loan into forbearance quickly over the phone, generally without filling out any paperwork, entering a borrower into an income-driven repayment plan involves lengthy conversations about different plans, helping a borrower fill out the initial application, and possessing both the initial and annual renewal paperwork.”
One motivation for the “easy way out” might be the least work option but Navient customer service representatives are allegedly also “compensated, in part, based on how short they can keep the average call.”
Navient alleged shortcuts continued year-after-year when the debtors who were actually enrolled in an income driven repayment plan had to recertify their beneficial repayment plan. Borrowers who failed to recertify “would automatically be removed from the income-driven repayment plan. Even temporary removal from the plan would result in one or more of the following negative consequences for borrowers: (1) an immediate increase in his or her monthly payment; (2) the addition of any unpaid, accrued interest onto the principal; and (3) the loss of an interest subsidy.”
The Navient recertification process was weak. The emails sent to borrowers contained vague subject lines like “Your Sallie Mae Account Information” or “New Document Ready to
View.” Debtors missed the importance and time sensitivity of these notices and those that did were dropped and penalized.
Even when things went right on those front, Navient often “either misallocated or misapplied by Navient Solutions.” These failures in payment processing “resulted in a range of negative consequences for borrowers including the assessment of improper late fees and interest, the loss of certain benefits, and having inaccurate negative information about them shared with consumer reporting agencies.”
In a seemingly mind boggling line of argument Navient continues to stand by its claim “they had no duty to provide individualized financial counseling to borrowers.” It seems mutually exclusive for Navient to encourage debtors to contact them for help and assistance and also say they have no duty to provide that very counseling or advice.
In the lengthy Opinion issued by Judge Mariani, Navient was not able to persuade the judge on that point. The Judge said, “Navient’s alleged practice is abusive under the CFP [Consumer Financial Protection] Act if Navient took unreasonable advantage of a borrower’s reasonable reliance that Navient would act in the borrower’s interest.”
The Court stated Navient might not have had a contractual responsibility to provide the advice they proclaimed but they did not have a right to “take unreasonable advantage of “the reasonable reliance by the consumer” that the loan servicer will “act in the interests of the consumer.”
Moreover, the Court found the act of Navient communicating statements to consumer they would provide advice, help, assistance, and options for borrowers did in fact create a duty for Navient to actually do that and act in accordance with their own statements.
In the end Judge Robert Mariani denied Navient’s claim to dismiss the lawsuit so it pushes forward.
You can read the entire Opinion here.