Navient Banned From Pupil Mortgage Servicing After $120 Million Settlement

Navient, as soon as the most important pupil mortgage servicer in the US, is dealing with a everlasting ban from servicing Direct Loans and different monetary assist applications as the results of a lawsuit from the Client Monetary Safety Bureau (CFPB).

The order additionally imposes $120 million in penalties, with $100 million allotted to redress for debtors and an extra $20 million in fines.

The CFPB’s lawsuit, which started in 2017, accused Navient of quite a few unlawful practices, together with steering debtors into expensive forbearance as an alternative of income-driven reimbursement plans (IDR), which might have considerably decreased their funds. By prioritizing forbearance, Navient allowed curiosity to accrue, main many debtors to pay extra in curiosity prices than they’d have underneath IDR plans.

The proposed settlement, if accredited by the court docket, will make sure that Navient is successfully faraway from managing federal pupil loans.

Navient Lawsuit

The lawsuit highlights that Navient misled debtors about the advantages of income-driven reimbursement plans and failed to tell them of the necessity to re-certify yearly, typically leading to larger month-to-month funds. 

The corporate additionally made quite a few processing errors, together with misapplying funds and harming the credit score scores of disabled debtors. A 2022 settlement with 39 state attorneys normal additional highlighted the corporate’s unlawful practices, together with originating predatory pupil loans.

Whereas Navient will nonetheless handle some FFELP loans, the ruling prohibits it from buying new loans or conducting direct servicing actions for FFELP loans. Moreover, Navient should adhere to strict necessities to guard borrower rights, together with making certain correct entry to reasonably priced reimbursement choices.

Influence To Pupil Mortgage Debtors

The order additionally requires Navient to:

• Pay $100 million redress to shoppers: Navient will likely be required to supply $100 million in redress for affected shoppers.
• Pay a $20 million penalty: Navient pays $20 million into the CFPB’s victims reduction fund.

Whereas it isn’t clear how the funds can be disbursed to shoppers harmed by Navient, it is a win for debtors who’ve been fighting their loans on account of mortgage servicing points.

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