This company Navient is quickly gaining a reputation as the Henry F. Potter of the U.S. student loan industry, and now one of Ohio’s finest public servants is preparing to drop the hammer on them.
Have I mentioned lately what a smart move it was for President Barack Obama to appoint former Ohio Attorney General and Treasurer Richard Cordray as the first director of the Consumer Financial Protection Bureau? Smart as a whip, I tell ye, as a whip.
As is Cordray, incidentally—smart, that is. And his efforts at the CFPB appear to be creating wounds that smart on the grifter paradise that has descended upon the American consumer.
Last week, Cordray announced that the CFPB is now considering a lawsuit against the nation’s largest student loan company for allegedly cheating borrowers.
The Consumer Financial Protection Bureau, which has been investigating the company for nearly two years, sent Navient a letter on Aug. 19 telling its executives that the agency’s enforcement staff had found enough evidence to indicate the company violated consumer protection laws, Navient disclosed Monday in a filing with the Securities and Exchange Commission. The CFPB also told Navient that the agency’s senior officials would now consider whether to sue the company in court.
The CFPB was proposed and established by U.S. Sen. Elizabeth Warren in the Dodd-Frank bill, and Cordray was nominated to be its first director. From 2011 until 2013, Republicans fought viciously to oppose Cordray’s appointment because, apparently, protecting consumers against huckster mortgage, credit card, and student loan practices will destroy America.
Concerns are mounting among policymakers that the nation’s growing $1.3 trillion student loan tab risks slowing economic growth, as millions of households either struggle to make payments or cut back in other ways. And regulators and experts worry that shoddy loan servicing may be partly responsible, as many borrowers complain they’re routinely mistreated and forced to stump up larger monthly payments than required.
Navient, which processes more student loan payments than any firm in the country, has been under investigation for at least two years by several federal and state authorities for allegedly overcharging borrowers and otherwise mistreating them in violation of the law. The Department of Justice accused the company in 2014 of intentionally cheating active-duty troops on their student loans for nearly a decade.
The CFPB also has been investigating the company for numerous allegedly dodgy practices, such as the way its debt-collection unit treats distressed debtors and how its loan-servicing operation interacts with borrowers. A group of state attorneys general led by Washington and Illinois has been probing the company for more than a year. A feared regulator on Wall Street, the New York Department of Financial Services, also has launched an investigation.
This company sounds like a real paragon of virtue in the student lending industry. Whatever did we need the CFPB for in the first place?
Is there more, you ask? Is there ever.
Last year in May, Navient and its predecessor, Sallie Mae, agreed to pay $36.6 million in fines and restitution after the Federal Deposit Insurance Corp. alleged it processed payments in a way that maximized late fees while the company also misled borrowers about how they could avoid late fees.
Around the time of the settlement, the company disclosed that it would “voluntarily” pay back other aggrieved borrowers about $42 million for its late-fee practices. That refund process — which the CFPB is expected to address — is now mostly complete, the company said in August in its most recent quarterly report.
What the hell kind of country is this now, sending children into adulthood saddled with an average of $35,000 in student loan and credit card debt after college? Wages have stagnated for 40 years and the path toward higher earnings is also now the path of crushing debt. As if that weren’t enough, banking lenders are committing large-scale fraud against borrowers.
A study by Bloomberg has shown that the cost of college has gone up 1,120 percent since 1978 when such records began being kept. That’s four times faster than the consumer price index. The price for college tuition and fees has radically outpaced inflation in every other category including housing, transportation, food, and the runner-up (still over 40 percent below college tuition) medical services.
Every now and again we are treated to a think piece in one of the remaining national glossies about how it’s so strange Millenials aren’t buying homes and automobiles like their parents did as though it’s some kind of lifestyle choice.
The truth is that Millenials are moving in with mom and dad after college, marrying later, and not buying homes and automobiles because most simply can not afford it. We are the first generation in America upon whom a lower standard of living has been passed.
Looking at this situation, the financial services industry sees little more than a population of vulnerable young people ripe for exploitation. But at least we have a watchdog like Cordray looking out for us, playing the George Bailey to Navient’s Potter.
“Just remember this, Mr. Potter, that this rabble you’re talking about, they do most of the working and paying and living and dying in this community. Is it too much to have them work and pay and live and die in a couple of decent rooms and a bath?”
David Charles DeWitt is a writer and man of sport and leisure. He has also written for Government Executive online, the National Journal’s Hotline, and The New York Observer’s Politicker.com. He can be found on Facebook and Twitter @DC_DeWitt.