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Navient (NASDAQ:NAVI) stock fell 5.8% after the Consumer Financial Protection Bureau (CFPB) filed a proposed order that would permanently ban the student loan provider from servicing federal direct loans.
The company, separately, said it has reached an agreement with the Consumer Financial Protection Bureau.
The proposed order would also prohibit the firm from directly servicing or acquiring most loans under the Federal Family Education Loan Program.
CFPB also fined NAVI $20 million as a penalty and $100 million to redress the borrowers who have been impacted by the actions.
“For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” said CFPB Director Rohit Chopra.
The firm said it is no longer a servicer or purchaser of federal student loans, and transferred its contract to service government student loans to a third party. Earlier this year, Navient also reached an agreement to outsource student loan servicing of its legacy FFELP student loan portfolios.
The company will oversee its third-party servicing provider to meet all operational terms of the agreement.
“While we do not agree with the CFPB’s allegations, this resolution is consistent with our go-forward activities and is an important positive milestone in our transformation of the company,” the firm said.
CFPB said the company pushed many student loan borrowers to take costly repayment options, and also “illegally deprived student borrowers of opportunities to enroll in more affordable income-driven repayment plans and forced them to pay much more than they should have.”
