California Attorney General Xavier Becerra plans to file a lawsuit this week against student-loan servicer Navient Corp. and two of its subsidiaries, alleging that the company steered borrowers toward more expensive repayment plans and provided incorrect information to them about their accounts, among other charges.
Becerra said in a statement that Navient services about $300 billion in federal and private student loans for 12 million borrowers, about 1.5 million of whom live in California.
He said that his office was "ready to hold Navient accountable."
Navient CEO Jack Remondi described the allegations in the pending lawsuit as "unfounded" and said it was "another attempt to blame a single servicer for the failures of the higher education system and the federal student-loan program to deliver desired outcomes."
He said in a statement that the Wilmington, Del., company and other loan servicers for the U.S. Education Department do not "design the complex and confusing repayment options and enrollment requirements for borrowers" or provide financial advice to students and their families.
The lawsuit against Navient will allege that the company violated the state's unfair competition and false advertising laws by not adequately disclosing how borrowers could be considered for income-driven repayment recertification plans that could reduce monthly payment amounts, and misrepresenting the "present amount due" to borrowers who were delinquent in payments, according to a statement from Becerra's office.
Navient subsidiaries Pioneer and General Revenue Corp. will also be charged in the lawsuit, as Becerra's office said Navient had assigned "thousands" of defaulted California loans to be collected by the firms.
The lawsuit will charge the two subsidiaries with misrepresenting the credit benefits of rehabilitating defaulted loans and providing false information on collection fees for rehabilitation.
