Navient May Be CFPB's Next Target For Legal Action

Navient Solutions, Inc. may be in legal trouble again. Late last week, the CFPB’s Office of Enforcement sent loan processing giant Navient a NORA (Notice and Opportunity to Respond and Advise) letter informing the company that it may recommend that the agency pursue legal action. The CFBP warned Navient that it may seek restitution, civil monetary penalties and corrective action against it.

The letter follows from an ongoing CFPB investigation into Navient’s disclosures, assessment of late fees and “other matters,” according to a Securities and Exchange Commission filing submitted earlier this week by Navient.

The CFPB’s NORA process is a procedural step and not a sure sign the agency will pursue legal action. Through the process, Navient will have the opportunity to explain to the agency why it thinks the agency should not pursue that action.

According to the SEC filing, Navient plans to participate in the NORA process and defend its actions. “NSI [Navient] continues to believe that its acts and practices relating to student loans are lawful and meet industry standards and, where applicable, the statutory or contractual requirements of NSI’s other regulators,” the company states. “As such, NSI intends to make a NORA submission to the CFPB.”

This is not the first time in recent memory that Navient has attracted negative attention from regulators. Last year the company ran afoul of the Federal Deposit Insurance Corp. (FDIC). The regulator accused the servicer of misleading consumers and maximizing late fees. The company agreed to pay nearly $37M in fines and announced it would chip in $42 million to affected borrowers in May of 2014.

The Department of Justice also recently investigated the company for the way it handled the student loans of active-duty soldiers.

The company broke away from Sallie Mae in 2014 and is now the largest servicer of student loans in the US.

“We’re dedicated to assisting our customers and helping them succeed, and continue to make enhancements to support our customers’ ongoing success,” notes Navient in its official statement. “We believe our practices meet or exceed standards and, where applicable, the statutory or contractual requirements of other regulators. Because of our data-driven outreach programs and one-on-one assistance our people provide to our 12 million student loan customers, loans serviced by Navient have higher income-driven repayment enrollment rates leading to a 40-percent lower default rate than the national average.”

insideARM Perspective

While this is not directly a debt collection story, the announcement is interesting as it is yet another example that the CFPB has been making the rounds within high profile firms in and around the ARM industry.

The CFPB recently told Department of ED contractor Performant Corp it would be closing it’s nearly two year investigation of the firm. No enforcement actions were necessary in that case.

Encore Capital Group (ECPG) announced earlier this month that it is in discussions with CFPB staff regarding practices and controls relating to their engagement with consumers that could result in a negotiated settlement or litigation.

PRA Group (PRAA) also mentioned as part of its Q2 earnings conference call that it has been engaged in ongoing discussions with the CFPB regarding debt collection practices and hopes to “narrow our differences and bring the matter to a conclusion.”