The Consumer Financial Protection Bureau is considering suing Navient Corp., the largest student loan company in the U.S., for allegedly cheating borrowers. Navient officials disclosed Monday in a Securities and Exchange Commission filing.
The company received a letter from the CFPB notifying executives that the bureaus enforcement team had found sufficient evidence, after a two-year investigation, to determine Navient violated consumer protection laws. For-profit college chains Corinthian Colleges Inc. and ITT Educational Services received similar letters from the CFPB before both were ultimately sued.
Navient has been under investigation by federal and state authorities for allegedly overcharging borrowers and mistreating them. The company said the CFPB's potential legal action stems from its late-fee practices and what it described as "other matters."
Navient and its predecessor, Sallie Mae, agreed in May 2014 to pay $36.6 million in fines and restitution after the Federal Deposit Insurance Corp. alleged it processed payments in a way that maximized late fees while the company also misled borrowers about how they could avoid late fees.
Navient further disclosed, around the time of the settlement, that it would voluntarily pay back other aggrieved borrowers about $42 million for its late-fee practices. That refund process is now mostly complete, the company said in August in its most recent quarterly report.
Navient processes more student loan payments than any firm in the country. Company executives told investors in the Monday filing that the company couldn't assure them that a CFPB lawsuit wouldn't significantly hurt the company, nor could it share an estimate of potential losses as a result of a CFPB-ordered penalty or lawsuit. The CFPB has been investigating Navient for numerous allegedly shady practices, including the way its collection arm treats debtors and how its loan-servicing operation interacts with borrowers. Last year, the Department of Justice accused the company of intentionally cheating active-duty troops on their student loans for nearly a decade. A group of state attorneys general led by Washington and Illinois began investigating the firm in early 2014. That investigation is part of a sweeping review of student lending by state and federal regulators. At the time, the company stated in a filing with the U.S. Securities and Exchange Commission that it was facing "significant year-over-year increases" in the number of investigative demands and in the breadth of information sought.
The New York Department of Financial Services also has launched an investigation.