Navient to face US student loan ban, pay $120 million to resolve CFPB lawsuit

(Reuters) – A U.S. regulator on Thursday said it is banning Navient (NASDAQ:) from servicing federal student loans, removing the company from a market it once led, and ordered the company to pay $120 million for years of student lending failures.

The U.S. Consumer Financial Protection Bureau said the ban would prevent Navient from servicing federal direct loans, and from directly servicing or acquiring most loans under the Federal Family Education Loan Program.

Navient was accused of steering borrowers into delaying loan repayments even if they qualified for repayment plans based on their incomes, causing them to pay more in interest, because it was cheaper and simpler for the Herndon, Virginia-based company.

The CFPB also faulted Navient for making mistakes in processing payments, and misleading borrowers about their rights.

Thursday’s settlement would resolve a lawsuit filed by the CFPB in Scranton, Pennsylvania in January 2017, and requires a judge’s approval.

The payment includes $100 million of restitution for consumers, and a $20 million civil fine.

Formerly known as Sallie Mae, Navient had been the largest U.S. student loan servicer when the lawsuit began, handling more than $300 billion of federal and private student loans for over 12 million borrowers, the CFPB said.