The legal problems facing Navient, one of the nation’s largest student loan debt collectors, mounted on Thursday as California’s attorney general said he would file a lawsuit accusing the company of widespread deceptions and mistakes that cost borrowers millions of dollars.
The accusations echo those in a major enforcement case against Navientthat was started by the Consumer Financial Protection Bureau last year, in the final days of President Obama’s administration. The bureau is still pursuing the case, but consumer advocates fear it will be dropped or settled by Mick Mulvaney, the bureau’s acting director, who has sharply reduced the agency’s powers and scrapped many of its lawsuits and investigations.
The actions of Mr. Mulvaney, who is also President Trump’s budget director, have prompted states to more aggressively flex their own consumer protection authority. California would be the fourth and largest state to sue Navient, joining Illinois, Pennsylvania and Washington.
States have sued over Navient’s handling of both private and federal student loans. The case in California focuses on the federal loans, which are made or backed by the government. Navient is among the largest of eight servicers hired by the government to collect $1.4 trillion owed by nearly 43 million people. The company services loans for 12 million borrowers, including an estimated 1.5 million in California, according to the attorney general’s office.