HARRISBURG, Pa. (CBS/AP) — A new federal lawsuit by Pennsylvania’s Attorney General Josh Shapiro says the nation’s largest student loan company engaged in abusive practices that have cost borrowers billions of dollars.
The complaint filed Thursday in federal court in Harrisburg, Pennsylvania, says Navient Corp. and Navient Solutions LLC sold “risky and expensive” subprime loans and damaged borrowers and co-signers by failing to perform core loan servicing duties.
“Navient repeatedly engaged in misleading practices meant to boost their profits at the expense of Pennsylvania students,” Shapiro said. “They crossed the line in pursuit of profit and we’re here to change their behavior and help the people who’ve been harmed.”
The lawsuit says the companies funneled people into a program that added massive interest costs when they should have been directing them into repayment plans indexed to income.
The Office of Attorney General’s lawsuit asks the court to order the following:
- Full restitution to all borrowers affected by Navient’s unlawful practices
- Disgorgement by Navient of unlawfully gained profits
- Civil penalties to be determined
- Rescission or reformation of all contracts or loan agreements between Navient and Pennsylvania consumers affected by the company’s unlawful practices
- Navient to cease collecting on – and delete any negative credit information it has furnished to consumer reporting agencies – the illegal loans at issue in the lawsuit.
Messages seeking comment from Navient weren’t immediately returned.
The Consumer Financial Protection Bureau, Illinois and Washington state also sued over the loan practices earlier this year. Navient has denied those allegations and said the lawsuits will drive up loan costs.
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