The argument stems from the CFPB’s lawsuit over deceptive practices at Navient that allegedly funnelled borrowers into forbearance, including creating obstacles to repayment and failing to act when borrowers complained.
Though Navient has called the allegations untrue, CEO Jack Remondi stated in a dismissal motion filed on March 24 that “Navient’s relationship with borrowers is that of an arm’s-length loan servicer, not a fiduciary counselor… [and] there is no expectation that the servicer will act in the interest of the consumer” – an unexpected swerve from what it says on its website, which advertises that Navient wants to help borrowers “successfully navigate paying student loans”.
Even more surprising is another statement in the motion, which claims that Navient is under no obligation to “provide the type of financial counselling the CFPB seeks”, using the justification that “publicly disseminated statements reaching millions of borrowers [such as the one on its website] cannot create a fiduciary-type relationship or obligation” with its customers.
The idea of a servicer dishing out advice to borrowers is a wolf in sheep’s clothing situation, so it is incumbent on borrowers to do their homework and be aware of their repayment options before going down the path prescribed by the servicer. Navient does, indeed, make its money from collection of late fees and interest payments from borrowers.
That is not to say borrowers should be blamed for going into forbearance, or struggling with their loan payments – US student loan debt is disturbingly high and getting higher, and shrinking funds from state and federal governments mean that young Americans are shouldering more debt every year.
Should the CFPB allegations about Navient turn out to be true, then the company needs to be taken to task for fuelling the student loan crisis.
In the meantime, however, if Navient truly wants to tout itself as “an arm’s-length” loan servicer, then its mixed messages aren't helping. It should do away with its customer-friendly claims and present itself as just another debt collector.