The consumer bureau, which filed its own motion Tuesday to conclude the case in its favor, declined to comment on pending litigation.
Companies such as Navient and FedLoan Servicing are paid millions of dollars by the federal government to collect student loan payments, guide people through the thicket of repayment options and help borrowers avert default. Critics of student loan servicers say they cut corners to save time and money at the expense of struggling borrowers.
Those accusations are at the heart of the consumer bureau’s 2017 lawsuit against Navient. Among the most serious allegations is that the servicer steered borrowers toward postponing payments through forbearance because it required less paperwork than enrolling them in low-cost plans. Because interest continues to accrue while loans are in forbearance, the CFPB said, the practice cost borrowers up to $4 billion in interest from January 2010 to March 2015.
Navient has long disputed the claims and accused the CFPB of cherry-picking a handful of incidents to drive a false narrative.
According to Tuesday’s filing, the CFPB flagged two phone calls during which the Navient representative did not mention income-driven repayment, a low-cost plan based on earnings. The borrower had actually discussed the option months earlier with another rep and eventually enrolled.
Navient said all of the borrowers the CFPB identified received information about income-driven repayment from the company. Several were ineligible. Others enrolled, while some chose not to apply. The company says the consumer bureau has not produced a single borrower, policy or practice to support its steering allegations.
“When all evidence — not just cherry-picked, isolated items — is evaluated, there is simply nothing to the CFPB’s claims,” Heleen said.
Consumer advocates rebut Navient’s characterization of the lawsuit. They point to an Education Department review and an internal memo detailing the company’s servicing strategy as evidence of Navient’s placing profits over people.
The department’s 2017 review of nearly 2,400 borrower calls found that Navient offered forbearance as the only option to 9 percent of those people and failed to dig deeper into whether they could have benefited from other plans.
Navient chief executive Jack Remondi disputed the claims in a letter to Sen. Elizabeth Warren (D-Mass.), who released the undisclosed review in 2018. He argued that the company presented the most appropriate options based on the borrower’s circumstances.
At the time, Warren, a staunch critic of the loan servicer, said, “Navient told the public that there was no merit to the CFPB’s lawsuit even after it received an Education Department audit that … found the company was not adequately servicing student borrowers.”
In the 2010 memo, a senior director at Sallie Mae, Navient’s former parent company, wrote: “Our battle cry remains, ‘Forbear them, forbear them, make them relinquish the ball.’ Said another way, we are very liberal in our use of forbearance once it has been determined that a borrower cannot pay cash or utilize other entitlement programs.”
Navient said the consumer bureau mischaracterized the memo, choosing to ignore that it discusses forbearance as a way to help borrowers resolve delinquencies and avoid default.
“Navient’s claims that it ‘did nothing wrong’ fly in the face of the evidence uncovered in this lawsuit,” said Seth Frotman, a former official at the CFPB and the executive director of the Student Borrower Protection Center, an advocacy group.