California is the fourth state to file a lawsuit against one of the government’s largest debt collecting agencies: Navient. California is the largest state to file a lawsuit against Navient, joining Pennsylvania, Washington, and Illinois. Navient is one of the eight largest debt collection services hired by the United States “to collect $1.4 trillion owed by nearly 43 million people.” The states are taking more action in managing consumer financial protection after Mick Mulvaney, the acting Director of the Consumer Financial Protection Bureau, encouraged states to “more aggressively flex their own consumer protection authority”.
The charges brought up against Navient by the California Attorney General Xavier Becerra are failure to steer borrowers towards their best options, raising repayment costs, prohibiting unfair competition, and false advertising. The complaint the AG filed focuses on Navient’s misleading practices that would ultimately guide borrowers towards repayment options that were ill-fitted or altogether harmful.
For the future of consumer financial protection, at least under the Trump administration, it is in borrower’s best interests that states individually handle these lawsuits since Mulvaney won’t. According to an article by the New York Times, “California will be the Fourth State to Sue Navient over Student Loans” by Stacey Cowley, Mulvaney has “sharply reduced the agency’s powers and scrapped many lawsuits and investigations.” Mulvaney will not take action to defend the borrower, and by dismissing cases brought up against these government agencies, he is directly supporting violations against consumer law.
The federal courts are stepping in against Navient and preventing the agency from limiting the rights of the state and the people to sue. Federal judges in Pennsylvania and Seattle denied Navient’s request for the state lawsuits to be dismissed. Judge Susan Bucklew in Tampa “rejected Navient’s argument that federal law prevents borrowers from suing the company for violating state consumer protection rules”. In this case, Navient is being sued for “making costly mistakes in handling their eligibility for public service loan forgiveness.”
The public service loan forgiveness program, which we discussed in our previous blog, is intended to provide workers in certain industries with loan forgiveness after making punctual repayments on their student loans for 10 years. This requirement is difficult enough to uphold for a borrower struggling to repay their student loans without any modification, but worse is that the Department of Education stands accused of purposefully misleading eligible borrowers from joining this program. Unsurprisingly, since Navient is hired by the government, they are involved in the same deceptive tactics as Betsy DeVos and her DOE. The only difference between Navient and the Department of Education is that Navient is facing courtrooms and lawsuits for their criminal actions while the DOE continues to violate the laws they’re meant to uphold.
https://www.nytimes.com/2018/06/28/business/navient-student-loans-california.html