DOE interfering with CFPB lawsuit with Navient

The Consumer Financial Protection Bureau is accusing the Department of Education of getting in the way of its lawsuit against a student loan giant. Last year, the Consumer Financial Protection Bureau filed a lawsuit against student loan giant, Navient. That lawsuit alleged the student loan company caused borrowers to struggle unnecessarily by steering them towards repayment plans that weren’t in their best interests and ignoring borrowers’ instructions about how their payments should be allocated. Last week, in a letter submitted to the judge overseeing the case, the CFPB claims that Navient isn’t producing documents requested as part of the case that are “essential to identifying the universe of harmed consumers,” because they don’t have permission from the Department of Education.

Navient is currently facing multiple suits from state law enforcement officials including California’s attorney general. The CFPB’s letter brings into question whether student loan companies’ relationship with the Department of Education shields them from other legal challenges. Reports have surfaced that the Department has instructed student loan companies not to respond directly to any third party without first seeking the agency’s permission. In the spring, another major student loan company filed a lawsuit against the state of Connecticut’s Department of Banking, claiming that the state was requiring the firm to provide documents it didn’t have permission from the Department of Education to release.

Betsy DeVos, Secretary of Education, released a memo earlier this year arguing that states can’t regulate student loan companies hired by the federal government, because state laws governing the companies are superseded by federal regulations. This position has prompted criticism of the Departments.

“It appears that Secretary DeVos is siding with one of the most complained about companies in America to try to obstruct the ability of the Consumer Financial Protection Bureau to enforce consumer protection law for student loan borrowers.”
Chris Peterson, senior fellow at the Consumer Federation of America

Navient spokesperson, Nikki Lavoie, issued a statement addressing this dispute. “This impasse is the result of the CFPB attempting to regulate the program of another federal agency.” Navient has previously denied the allegations brought in the suit and Lavoie argued that the CFPB hasn’t found evidence to support its claims against the company. Navient’s position is that their contract with the Department requires them to get the agency’s approval before sharing borrower data. Lavoie adds that the request for records “is an attempt to allow the search to continue.”

In their own letter to the judge in the case, Navient asked the court to hold an in-person conference regarding the issue and to give the Department the opportunity to be heard on it. “This issue is, fundamentally, a dispute between two agencies of the federal government,” an attorney representing Navient wrote.

At the crux of this dispute is the Department of Education’s interpretation of the Privacy Act. The act governs how federal agencies handle information they obtain. The CFPB claims that the Department is using it as a justification for blocking the release of the requested Navient documents. In the past, the Department and the CFPB shared information about student loan companies, but the Department ended their information sharing agreement last year and called the consumer watchdog ‘overreaching and unaccountable.

Do you wonder how these developments will affect your student loan status? Call a San Diego Student Loan Lawyer at (619) 295-3322 to schedule a free initial consultation.