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The student loan giant Navient has reached a $120 million settlement with the Consumer Financial Protection Bureau over its practices with student loan borrowers, the company told CNBC.
The CFPB sued Navient in 2017 for misleading borrowers and providing them with bad information, causing many to pay more than they needed to.
The consumer watchdog agency also accused Navient of approving student loan borrowers at high prices, causing many to pay high interest charges.
In addition, the CFPB said Navient miscalculated borrowers’ payments and damaged the credit reports of disabled borrowers, including severely injured veterans.
At the time, the lender was the largest student loan servicer in the US, managing the accounts of more than 12 million people.
Navient will stop servicing the government’s federal student loans in 2021. The lender also agreed to no longer enter into servicing federal student loans.
Navient still has private student loans for about 3.7 million people, though another service, Mohela, will service those accounts.
The company’s shares were trading slightly higher on Thursday morning, in the open market.
As part of the settlement, $100 million will be used to make payments to affected customers, as determined by the CFPB, Navient said.
The remaining $20 million will go to the CFPB’s civil penalty fund.
Rohit Chopra, director of the Consumer Financial Protection Bureau (CFPB), speaks during a hearing in Washington, DC, USA, Thursday, May 9, 2024.
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“For years, Navient’s top executives profited by exploiting students and taxpayers,” CFPB Director Rohit Chopra said in a statement.
“By banning the notorious student loan giants from servicing federal student loans and ensuring that their operations cease, the CFPB will finally end years of abuse,” Chopra said.
Navient hailed the agreement as a positive step for the company.
“This agreement brings to light a decade-old issue,” a Navient spokesperson said in a statement to CNBC. “While we disagree with the CFPB’s allegations, this resolution is consistent with our go-forward activities and is an important positive milestone in our company’s transformation.”
