The state of Pennsylvania sued the nation’s largest student loan company on Thursday, alleging that Navient Corp. perpetrated a wide range of consumer abuses both before and after the financial crisis.

The complaint was filed in U.S. District Court by the state’s Democratic attorney general, Josh Shapiro. It demonstrates that despite the recent appointment of more industry-friendly regulators in Washington, D.C., financial services companies still face significant legal threats from state capitals.

Shortly before President Trump’s inauguration in January, similar lawsuits were filed against Navient by the Consumer Financial Protection Bureau and attorneys general in Illinois and Washington state.

Pennsylvania Attorney General Josh Shapiro
“The more businesses like Navient put their bottom line ahead of the interests of their customers and consumers, the more vigilant we will be to protect Pennsylvanians and hold businesses like Navient accountable for their misconduct,” said Pennsylvania Attorney General Josh Shapiro.

“The more businesses like Navient put their bottom line ahead of the interests of their customers and consumers, the more vigilant we will be to protect Pennsylvanians and hold businesses like Navient accountable for their misconduct,” Shapiro said Thursday in a press release.

The Pennsylvania lawsuit alleges that various lending and loan servicing activities at Navient and its corporate predecessor, Sallie Mae, ran afoul of state and federal consumer protection laws.

Some of the practices at issue date back all the way to the early 2000s, long before Sallie Mae was split into two companies, Navient and SLM Corp. Following the 2014 split, Navient assumed the liabilities of the predecessor companies.

On Thursday, Navient called the state of Pennsylvania’s allegations “completely unfounded” and vowed to defend its record in court.

But the lawsuit appeared to rattle investors in Wilmington, Del.-based Navient. The company’s stock price was down 14% in late-day trading Thursday, though it was hard to separate the lawsuit’s impact from investors’ reaction to an acquisition that Navient announced late Wednesday.

Under that deal, which drew mixed reviews from stock analysts, Navient agreed to pay $155 million in cash to acquire Earnest, a four-year-old online lender that specializes in refinancing student loans.

The financial burden imposed by student debt is an important political issue across the country, but particularly so in Pennsylvania. Members of the class of 2016 in the Keystone State owed an average of $35,759, which trailed only New Hampshire, according to a recent report by the Institute for College Access & Success.

The Pennsylvania lawsuit charges that during the 2000s, Navient’s corporate predecessor made high-cost loans to students who were a poor bet to repay. Offering those subprime student loans enabled the firm to become a preferred lender at specific colleges, a status that generated more business from better-qualified borrowers, according to the lawsuit.

“If the borrower can create condensation on a mirror, they need to get a loan this year,” Thomas Fitzpatrick, then-CEO of Navient’s predecessor company, allegedly said during a 2007 meeting.

The lawsuit also charges that more recently Navient made it difficult for borrowers to enroll in income-based repayment plans. Instead, the company allegedly steered borrowers into forbearance plans, which saved money for Navient but were inappropriate for borrowers who had long-term financial hardships.

Navient said in its response to the lawsuit that 49% of the federal student loan balances that it services are enrolled in income-driven repayment plans. It also asserted that borrowers serviced by Navient are 37% less likely to default than those serviced by other firms.

“Navient is a leader in helping student loan borrowers succeed,” the company stated.

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