AG Ferguson: Judge says national student loan manager Navient broke law by paying off student debt
SEATTLE – A King County Superior Court judge ruled that Navient, the nation’s largest student loan manager, violated the Consumer Protection Act by engaging in unfair and deceptive conduct related to Washingtonians’ student loans. This is the first time that a judge has ruled that Navient broke a consumer protection law in a lawsuit for the student loan service filed by a state attorney general or by a federal agency. consumer protection. Attorney General Bob Ferguson has argued this case for January 2017, seeking accountability for Navient’s conduct, legally enforceable conditions to prevent future illegal conduct, and financial restitution for Washingtonians aggrieved by the illegal conduct.
King County Superior Court Judge Veronica Galván issued an order today that Navient violated the Consumer Protection Act as a result of his conduct relating to co-signing loans by family and friends.
Today’s ruling by Judge Galván does not resolve all of the issues in the case. A full trial over Ferguson’s additional claims is scheduled for April 18, 2022.
Navient came into being when Sallie Mae, which Congress created in 1973 to support guaranteed student loan programs, split in 2014. Navient and Sallie Mae Bank emerged from that split. Navient serves loans from more than 12 million borrowers nationwide and approximately two million in Washington State. In total, it serves over $ 300 billion in federal and private student loans.
“I will protect student borrowers from lenders who cheat Washingtonians,” Ferguson said. “Too many student loan borrowers in Washington are struggling to stay afloat. We will continue to hold to account Navient’s illegal conduct and student loan relief for thousands of Washingtonians who have been treated unfairly.
Deceptive publication practices of the Navient co-signatories
Justice Galván issued an order today that granted partial summary judgment on one of Ferguson’s consumer protection claims in the 2017 lawsuit against Navient. Galván ruled that Navient’s statements promoting the release of the co-signers misrepresented how Navient actually implemented the program. Navient deceptively promoted a “co-signer release” feature of private loans to entice family and friends to co-sign the loans. Navient then put up arbitrary barriers and did not reveal that very few borrowers get a co-signer released.
Specifically, Navient told borrowers that they could become eligible to remove a co-signer, among other things, by making a number of consecutive and on-time loan repayments. However, if a borrower made lump sum payments before the normal due date and then resumed making the remaining payments as scheduled, Navient viewed the payment interruption as a disqualifying event for the release of their co-signer. Navient applied this requirement in a way that reasonable borrowers could not have foreseen.
For example, if a borrower had monthly payments of $ 100 but made a payment of $ 300, Navient did not count that lump sum payment as three consecutive one-off payments, even though the account was current and prepaid. In other words, Navient penalized borrowers for paying in advance.
Status of the 2017 trial
The discovery continues on the remaining claims against Navient. The attorney general’s office received terabytes of data from Navient and information dating back to when it was Sallie Mae.
Ferguson’s lawsuit aims to provide financial assistance and relief to thousands of Washingtonians who have been subjected to Navient’s unfair and deceptive loan and collection service practices. Ferguson claims Navient violated state consumer protection law with numerous illegal service and collection methods and, like Sallie Mae, providing risky subprime loans to consumers.
The 2017 lawsuit came after a multi-year investigation by Washington, Ill. And the Federal Bureau of Consumer Financial Protection, each of which filed lawsuits against Navient. The states of California, Pennsylvania, Mississippi and New Jersey then filed their own lawsuits with similar claims against Navient.
Remaining claims against Navient
Washington’s lawsuit against Navient includes several other complaints relating to the conduct of Navient, and his predecessor Sallie Mae, in granting and servicing student loans.
For example, Ferguson claims that while operating under the name Sallie Mae, the company made predatory and subprime loans to students attending some for-profit colleges, despite its own expectations that an extremely high percentage of students. would not be able to reimburse them. Navient has provided these subprime loans through “tailor-made” programs with schools in order to gain access to a volume of highly profitable federally guaranteed loans and to “blue chip” private borrowers.
The attorney general’s office also says Navient improperly urged financially troubled borrowers to refrain from lending instead of explaining income-based repayment options. While forbearance was good for the business because it was simple and cheap, it was not beneficial for most long-term borrowers. Forbearance allowed borrowers to temporarily suspend payments, but their interest continued to accrue. When repayment resumed, Navient added the accrued interest to the loan principal, and borrowers ended up paying more interest on their original interest.
Ferguson’s initial investigation also found that, while servicing student loans, Navient often misapplied borrower payments and failed to follow the borrower’s instructions on how to allocate overpayments. This caused borrowers to receive unwarranted collection calls and forced them to spend time correcting Navient’s mistakes.
Assistant Attorneys General Julia Doyle, Heidi Anderson, Craig Rader, Kathleen Box, Seann Colgan and Tad Robinson-O’Neill are handling the file for the Attorney General’s office.
Earning Student Loan Relief For Borrowers
The trial is part of the Attorney General’s Student Loans Initiative, a greater effort to help borrowers navigate the complexity of enrollment and then reimburse studentsyears.
In January 2019, Ferguson reached a legally binding agreement for more than $ 7.6 million in debt relief of Career Education Corporation (CEC), a for-profit higher education company, in a lawsuit for the company’s use of deceptive practices to attract potential students. CEC owned and operated two campuses in Washington until it closed them. In addition to debt relief and other injunction conditions, the company is legally required to disclose accurate information to prospective students about costs, graduation rates, placement rates, and debt. median of graduates.
In September 2020, Ferguson announced that 816 former students of the ITT Technical Institute (ITT Tech) in Washington State would receive $ 5.9 million in debt relief. ITT Tech was a for-profit university that brutally shut down all of its 149 campuses in September 2016, including the Seattle, Everett, and Spokane Valley campuses. The amount covered all unpaid debts these borrowers owed to PEAKS Trust, a private loan program created to fund loans to the for-profit ITT Tech college. Debt cancellation resolved an investigation Ferguson launched with a bipartisan coalition of attorneys general into PEAKS Trust’s unfair and deceptive lending practices. The deal called for the dissolution of PEAKS Trust, formed after the 2008 financial crisis.
In June 2019, Ferguson announced that following an investigation, Student CU Connect LLC (CUSO) would provide debt relief for 100% of its student loans for deceiving ITT Tech students into granting the loans. CUSO provided a total of $ 5.1 million in student debt relief to 538 Washington borrowers who attended ITT Tech. The median amount of debt relief Washington borrowers received was $ 6,096.
Ferguson also recovered over $ 1.5 million by cracking down on debt adjustment companies that charge fees to help borrowers consolidate their federal student loans and enroll in income-driven repayment plans. – tasks that loan managers of borrowers can and should do for free.
AG Student Loan Initiative
The Attorney General’s Office introduced the Student Loan Transparency Act in 2017, a bill requiring schools to provide students with basic information about their student loans. The bill passed overwhelmingly in the State House with a bipartisan vote and unanimously in the Senate. Ferguson called for the legislation when he filed the Navient lawsuit.
To help student borrowers in Washington, the attorney general’s office compiled a Student loan survival guide.
Additionally, borrowers who need help understanding or resolving issues with their student loans should contact Washington’s Student Loan Advocate representative at [email protected]
The Attorney General’s Office is Washington state’s primary legal office with attorneys and staff in 27 state divisions providing legal services to approximately 200 state agencies, boards, and commissions. Visit www.atg.wa.gov to learn more.
Brionna Aho, Director of Communications, (360) 753-2727; [email protected]
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