Student lender Navient sees stocks rise despite accusations of deception

Inside Subprime: January 26, 2017

By Caroline Thompson

Before the Consumer Financial Protection Bureau erupted in chaos and confusion, the agency was focused on helping vulnerable Americans fight back against predatory lenders. Last January, mere days before President Trump’s inauguration, the CFPB filed a lawsuit against student loan giant Navient, alleging the loan servicer “illegally cheated borrowers out of repayment rights through shortcuts and deception.”

Although the future of the CFPB remains murky as leadership disputes and the new administration threaten to tear it apart from the inside out, the Bureau has continued its fight with Navient in a series of court battles. Over the course of the year, Illinois, Pennsylvania, and Washington have also filed lawsuits against the lender, and in August 2017, a U.S. District Court judge denied Navient’s motion to dismiss.

“For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans,” said former CFPB Director Richard Cordray in a statement last year. “At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them and today’s action seeks to hold them accountable.”

You might think a company dealing with such serious charges would see some negative financial consequences, but in fact, the opposite has been true. While stocks in Navient fell slightly back in October when Pennsylvania filed its lawsuit against the company, they ended out the year with a nearly 10 percent jump in stock price, according to a report from Nasdaq.

This rise in stock is surprising, given that Navient reported an $84 million loss in the fourth quarter of 2017. According to an article in Delaware Online, the company has attributed this loss “to one-time charges relating to restructuring costs and to changes in the federal tax code, which came after President Donald Trump in December signed a law slashing corporate tax rates.”

Navient CEO Jack Remondi said the company expects to reduce its operating costs by 3 percent in 2018 and has repeatedly called the lawsuits pending against Navient “unfounded.”

“While 2017 started with the challenge of the (Consumer Financial Protection Bureau) and Attorney General lawsuits, I am particularly proud that our team did not let these unsubstantiated claims distract us from executing our business plan,” he said in a statement on Wednesday.

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