On May 19, student loan servicer Navient filed for summary judgement on a Consumer Financial Protection Bureau (CFPB) lawsuit started over three years ago by then-CFPB Director Richard Cordray. In the filing, Navient urged Judge Robert D. Mariani of the Middle District of Pennsylvania to stop the litigation, arguing that the agency has yet to bring forth any evidence to support its claim that the company purposefully misled borrowers into forbearance.
Notably missing from the CFPB’s case is any evidence for its central claim … that Navient “steered” borrowers into forbearance by keeping them in the dark about income-driven repayment (“IDR”) options.
“Unable to prove its claims under the applicable legal standards, the CFPB seeks to invent a novel and unsupported one,” the motion says.
The CFPB lawsuit against Navient was launched in January 2017, just a few days before the end of President Obama’s second term. The suit alleges that Navient “systematically and illegally fail[ed] borrowers at every stage of repayment” by misleading them and steering them towards forbearance—a loan status where payments are temporally suspended but where interest continues to accrue—instead of other repayment options such as income-based repayment. The suit aimed to provide “appropriate restitution” to those “consumers harmed by [Navient’s] unlawful conduct.”
Navient’s motion for summary judgement comes after an earlier move by Pennsylvania’s Clerk of the Court late last year that unsealed the legal brief filed by the CFPB in March 2019 to bolster the suit. However, it had the contrary effect because attached to the brief were a number of documents that supported the defense’s claims.
For example, the brief included a chart that was used by Navient staff for helping borrowers choose a repayment option. While the CFPB alleged that Navient pushed borrowers towards forbearance, the chart placed forbearance all the way at the bottom of the list, after extended repayment, graduated repayment, income-based repayment (IBR), income-contingent repayment (ICR), income-sensitive repayment (ISR), and deferment. The chart also explicitly stated that forbearance shouldn’t be discussed at all until all other options had been “exhausted.”
Moreover, the brief revealed that the CFPB had cherry picked evidence in the case. This came after previous revelations during discovery when Navient asked the CFPB to identify specific borrowers who were supposedly harmed by their business practices. Soon after, the CFPB brought forward 15 witnesses from its flawed consumer complaint database who alleged they were hurt by Navient. However, when Navient had the chance to examine the records of these witnesses, it showed that Navient hadn’t done anything to intentionally mislead them. In fact, it turned out that one witness had actually lied to Navient about their income to be eligible for another repayment option.
It’s obvious that the primary allegations of the CFPB’s suit are meritless. It also appears that the bureau has become cognizant of that fact and is now moving the goalposts to try and go after Navient on other charges. To that point, the motion for summary judgement states that “The CFPB no longer seeks to prove that Navient affirmatively ‘pushed’ borrowers into forbearance,” and that “The CFPB does not even seek to prove that Navient kept borrowers in the dark about IDR. Instead, the CFPB claims that the repeated disclosures to borrowers about IDR are immaterial.”
The motion also makes the point that the CFPB is using the lawsuit to impose new student loan regulations, rather than going through the formal rulemaking process.
For these reasons, it’s more than understandable why Navient would move to bring this sham lawsuit to an end. However, despite the litany of pro-consumer deregulatory actions taken by Trump-appointed CFPB Director Kathy Kraninger, the Bureau has yet to end this frivolous lawsuit. Instead, it doubled down last week, filing its own motion for summary judgement. While the motion’s support brief was filed under seal, it’s safe to assume the CFPB wants Judge Mariani to rule in their favor—especially when considering that the Bureau tried to stop one of its former employees from testifying against its case earlier this year.
Six years have passed since the CFPB began its investigation into the defendants, and it has been over three years since formal litigation began. As it becomes more clear how little evidence the CFPB has to bolster its claims against Navient, the bureau should simply drop this Obama/Cordray-era case instead of dragging it out further. Rather than pursuing frivolous lawsuits like this, the CFPB should focus on getting rid of #NeverNeeded rules that hinder the COVID-19 economic recovery and delivering regulatory relief to struggling consumers.