Xavier Becerra, the attorney general of California, accounted yesterday that his office is planning to file a lawsuit against Navient Corp. and its debt collection subsidiaries, alleging “misconduct in the servicing and collection of federal student loans.”
In the suit, Becerra will allege that the companies violated state unfair competition and false advertising laws. The AG’s suit will allege that Navient:
- Steered vulnerable borrowers toward more expensive repayment plans;
- Failed to adequately disclose how students could attain income-driven repayment recertification;
- Misrepresented the order in which it would apply overpayments;
- Misrepresented the “present amount due” to delinquent borrowers; and
- Failed to properly discharge the federal student loans of borrowers with a total and permanent disability
Becerra will allege that the two debt collection units — Pioneer and General Revenue Corp.:
- Misrepresented to borrowers the credit benefits of rehabilitating defaulted loans;
- Provided false information as it relates to collection fees on rehabilitation; and
- Inaccurately told borrowers that disability loan forgiveness required a permanent inability to work, when in fact no such stringent requirement existed
“Navient exploited every family’s dream of witnessing our children graduate from college. Our families are now facing a student loan debt crisis. America’s college students owe $1.5 trillion in outstanding student loans — more than the entire amount Americans owe in credit card debt,” Becerra said in a statement. “It’s $123 billion in federal student loan debt in California alone. Navient’s loan servicing abuses have compounded the misery of parents and students who sacrificed to pay for college. Our students can’t afford to be cheated out of any more money than they legally owe simply because Navient knew how to game the system. We are ready to hold Navient accountable.”
