The Wilmington-based student loan servicing company Navient can’t seem to catch a break. After a long year of negative headlines, shareholders are fed up and seeking damages in court. Shareholders allege that Navient withheld information regarding subprime student loans over the past year.
This new development stems from and follows several legal actions involving the Pennsylvania Attorney General’s office and the Consumer Financial Protection Bureau at the federal level. In Pennsylvania, AG Shapiro cited “deceptive practices and predatory conduct” when filing the lawsuit.
This lawsuit followed other lawsuits including a case by the Washington AG and the CFPB on separate occasions. The former suggested that Navient treated borrowers “unfairly,” and the latter accused Navient of systematically steering borrowers away from certain payment plans and failing borrowers.
Navient has contested all of these claims, but damage was still done.
After Pennsylvania AG Josh Shapiro filed his lawsuit in October, the share price of Navient fell by more than 14 percent. That drop eliminated over $500 million in market value for the beleaguered lender’s securities. Navient investors such as Melvin Gross were frustrated to learn that they bought into the company’s stock at “artificially-inflated prices.”
Misrepresenting the quality of a loan book of business is a big no-no when it comes to investor and shareholder relations. Federal and state authorities along with a class action of Navient investors are all hoping to find restitution in the courtroom this December and later in 2018.
Officials from Navient announced in a statement that the company “will vigorously defend our record in court, and are confident we will prevail following an impartial review of the facts.” It bodes well to keep in mind that these are all just allegations, including the previous lawsuits.
Navient, the largest of the student loan servicers, is only one of many lending companies to fall under scrutiny recently, but the high profile and large borrower base make it an obvious target for regulators. Given the fact that student loans are a prominent issue today, companies are being held to higher standards.