Navient can’t block gov­ern­ment claims that stu­dents duped

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - SHAHIEN NASIRIPOUR

Stu­dent loan gi­ant Navient Corp. has suf­fered a pair of court­room de­feats in its at­tempt to block gov­ern­ment law­suits al­leg­ing the na­tion’s largest stu­dent debt com­pany mis­treated bor­row­ers.

The losses come in a trio of law­suits filed in Jan­uary by the U. S. Con­sumer Fi­nan­cial Pro­tec­tion Bureau and state at­tor­neys gen­eral of Wash­ing­ton and Illi­nois. They col­lec­tively al­lege Navient mis­treated hun­dreds of thou­sands of stu­dent debtors by tak­ing short­cuts to min­i­mize its own costs, while ad­ding what the con­sumer pro­tec­tion bureau said was as much as $4 bil­lion in in­ter­est charges to bor­rower loan bal­ances. Navient il­le­gally steered strug­gling bor­row­ers fac­ing long-term hard­ship into pay­ment plans that tem­po­rar­ily post­poned bills while in­ter­est con­tin­ued to ac­crue, the of­fi­cials al­leged, rather than help­ing them en­roll in fed­eral pro­grams that cap pay­ments rel­a­tive to their earn­ings and of­fer the prom­ise of loan for­give­ness. Navient has de­nied the al­le­ga­tions.

On Fri­day, U.S. Dis­trict Judge Robert D. Mar­i­ani in Scran­ton, Pa., de­nied Navient’s mo­tion to dis­miss the con­sumer pro­tec­tion bureau law­suit. Mar­i­ani wrote in his rul­ing that Navient’s ar­gu­ment that its ac­tiv­i­ties com­plied with the Higher Ed­u­ca­tion Act, Depart­ment of Ed­u­ca­tion reg­u­la­tions, and its loan ser­vic­ing con-

tract with the Ed­u­ca­tion Depart­ment didn’t re­lieve the com­pany of its obli­ga­tion to not com­mit un­fair, de­cep­tive, or abu­sive acts in vi­o­la­tion of the Con­sumer Fi­nan­cial Pro­tec­tion Act. Mar­i­ani also dis­missed Navient’s ar­gu­ment that bor­row­ers can’t rea­son­ably rely on it to coun­sel them on their many op­tions, rul­ing that Navient’s pre­vi­ous pub­lic state­ments to the con­trary “cre­ated a duty to act in ac­cor­dance with their own state­ments.” A con­sumer pro­tec­tion bureau anal­y­sis ear­lier this year found that Navient was the na­tion’s most-com­plained about fi­nan­cial com­pany. Mar­i­ani’s rul­ing fol­lowed a July 7 de­ci­sion by state court Judge Veron­ica AliceaGal­van in Seat­tle, who de­nied Navient’s mo­tion to toss out Wash­ing­ton At­tor­ney Gen­eral Bob Fer­gu­son’s law­suit. Mean­while, Judge Kath­leen M. Pan­tle in Chicago has yet to rule on Navient’s mo­tion to dis­miss Illi­nois At­tor­ney Gen­eral Lisa Madi­gan’s law­suit. Navient ar­gued that both the Wash­ing­ton and Illi­nois cases should be dis­missed in part be­cause state law is pre­empted by fed­eral laws that gov­ern the loan com­pany. For now, the two court­room losses mean the Wash­ing­ton and con­sumer pro­tec­tion bureau law­suits can move to­ward trial, al­low­ing au­thor­i­ties to de­mand ev­i­dence from the com­pany and pro­vid­ing them with more lever­age to force a set­tle­ment. More­over, Navient re­mains un­der in­ves­ti­ga­tion by other state au­thor­i­ties while it seeks to land a lu­cra­tive Trump ad­min­is­tra­tion con­tract to con­tinue col­lect­ing pay­ments from bor­row­ers with fed­eral stu­dent loans. “We are con­fi­dent we will pre­vail in the le­gal process,” Pa­tri­cia Chris­tel, a Navient spokesman, said in a pre­pared state­ment about Mar­i­ani’s de­ci­sion. One Navient ar­gu­ment fell par­tic­u­larly flat with the fed­eral court. In its com­plaint, the con­sumer pro­tec­tion bureau claimed that one way Navient failed bor­row­ers was through what it de­scribed as in­ad­e­quate email no­tices warn­ing them that their in­come-based re­pay­ment plans were com­ing to an end. In these plans, the U.S. gov­ern­ment al­lows bor­row­ers to make monthly pay­ments based on their earn­ings, rather than based on how much they owe. To al­low for per­sonal in­come changes over time, the pay­ment amounts are good for only one year, af­ter which bor­row­ers need to re-cer­tify what they make for the next year’s batch of monthly pay­ments. The con­sumer pro­tec­tion bureau ar­gued that Navient’s emails to debtors didn’t ex­plain that their re­pay­ment terms were end­ing. Rather, the emails sim­ply di­rected bor­row­ers to log onto their ac­counts on Navient’s web­site. Dur­ing a court­room hear­ing, Mar­i­ani wrote, Navient said its email was sim­i­lar to the out­side of an en­ve­lope. Bor­row­ers need to click on the link in emails Navient sent, just like re­cip­i­ents need to open en­velopes to see what’s in­side. But Mar­i­ani wasn’t con­vinced. Navient’s re­minder email was akin to “re­ceiv­ing an en­ve­lope, open­ing it, and find­ing that the let­ter in­structed the re­cip­i­ent to call a phone num­ber to re­ceive more in­for­ma­tion as to what the let­ter con­cerns,” the judge wrote.

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