The Consumer Financial Protection Bureau and Navient have reached a tentative agreement that would require the student loan servicer to pay $120 million and ban Navient from ever servicing federal student loans again.
The settlement still needs to be approved by a court.
The CFPB accused Navient of steering student loan borrowers into costly repayment options and depriving borrowers of entering more affordable income-driven repayment plans. The CFPB's suit claims Navient encouraged borrowers to go into forbearance instead of income-driven repayment plans. By doing this, Navient collected additional interest charges.
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Navient was also accused of botching payment processing by misallocating payments for those with multiple student loans. The CFPB said the errors resulted in late fees and other charges.
Navient says it disputes the CFPB's findings but settled nonetheless.
"This agreement puts these decade-old issues behind us. While we do not agree with the CFPB’s allegations, this resolution is consistent with our go-forward activities and is an important positive milestone in our transformation of the company," the company said in a statement.
The company also noted that it stopped servicing federal student loans and has since transferred accounts to a third party.
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The CFPB says that Navient will pay $100 million in redress to student loan borrowers and an additional $20 million in penalties.
“For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” said CFPB Director Rohit Chopra. “By banning the notorious student loan giant from federal student loan servicing and ensuring the winddown of these operations, the CFPB will finally put an end to the years of abuse.”
The CFPB says affected borrowers will be mailed checks as part of Navient's redress.
