Navient Student Loan Usury Interest Class Action Lawsuit

This lawsuit alleges that Navient Solutions, Inc., the successor entity to student lender Sallie Mae, charged student loan interest rates to California borrowers that were in excess of the 10% annual interest rate limit permitted by California Usury laws.

In May 2014, Navient Solutions, Inc. (NAVI) was spun off from Sallie Mae, Inc., the publicly traded corporation that originates, services and collects private student loans. The newly created publicly held Navient now holds most of Sallie Mae’s loan portfolio and is the nation’s largest servicer of federal student loans.  Multiple federal and state authorities have been conducting investigations of Sallie Mae and Navient loan servicing practices for several years involving alleged overcharges to borrowers and other loan payment processing activities.  Navient stock has decreased almost 40% in value since the start of the year.

On October 21, 2015, several plaintiff borrowers who were California residents when they applied for and obtained private credit student loans in 2002 through 2004 from Oklahoma based lender Stillwater National Bank and Trust Co. (Stillwater) filed suit (U.S. District Court Central District of California) against Navient, as the loan processor that succeeded Sallie Mae and several other entities to which their loans have been assigned.  Stillwater and Sallie Mae had entered into an agreement in 2002 that authorized Sallie Mae to originate, underwrite, market and fund loans for which Stillwater would be identified as the lender and which Sallie Mae would then purchase from Stillwater. 

The plaintiffs allege that the substance of their loan transactions made Sallie Mae their actual lender and that the California usury limit of 10% per  year applied to their loans.  Each plaintiff’s student loan interest rate was tied to the “Prime Rate”, which ranged from 3.25% to 8.25% since they obtained their loans.  The complaint alleges the borrowers' loan interest rates have been as high as 18.125% per annum and that two plaintiffs’ loan rates have never been below 13.125% per year.

The complaint claims that private loans to California residents made under the 2002 Stillwater agreement are subject to California’s Usury Law prohibiting loan interest rates from exceeding 10% per annum.  The complaint seeks class action status for all persons who obtained a loan with an application that identified Stillwater National Bank as the lender and listed California as the residence of the borrower, and who were charged interest at an annual rate of more than 10% for any quarterly period, and whose loan is outstanding or was paid off within four years of the filing of the claim.

The claim requests an order for Navient to refund, credit or cancellation of all interest paid or due that was charged at a usurious rate, limitations on any future interest to not more than 10% per annum, restitution, compensation to borrowers of three times interest paid, attorney fees and damages.

Article Type: Lawsuit
Topic: Consumer
Tags: Excessive Interest Rate, Unfair Services, Your Money