Navient CEO denies government accusations

Jack Remondi, CEO of Navient, forcefully denied federal government claims the Wilmington-based student loan provider created obstacles to prevent borrowers from paying off their loans.

"It was disappointing that regulators disregarded the facts in order to make a political statement," Remondi said during an analyst conference call to discuss Navient's fourth-quarter and full-year earnings. "This political statement is based on a false narrative about the practices and outcomes Navient delivers for borrowers.

"Just because they say it doesn't make it true," he said.

The Consumer Financial Protection Bureau, a government agency created after the 2008 financial crisis to monitor unfair actions against consumers, filed a lawsuit earlier this month against Navient, the country's largest student loan provider. It claims Navient has intentionally provided bad information, incorrectly processed payments and failed to respond to borrower complaints. The lawsuit alleges "through shortcuts and deception," Navient illegally cheated borrowers out of lower repayments.

"For years Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans," said Richard Cordray, CFB's director, in a statement announcing the lawsuit. "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."

Navient, which spun out from Sallie Mae in 2014, employs about 6,000 workers nationwide with 800 in Delaware. Navient's local employees are split between its 46,000-square-foot headquarters along the Wilmington Riverfront and the Iron Hill Corporate Center near Newark. It manages more than $300 billion in consumer loans.

When asked by one analyst how Navient plans to defend itself, Remondi said it planned to continue communications with the CFB and demonstrate that it has, in fact, helped borrowers reduce their debts. Remondi said Navient customers are 31 percent less likely to default compared to competitors.

"That means helping borrowers manage their payments, as I mentioned a few times in terms of some of our statistics, our customers are less likely to be delinquent, they are more likely to be enrolled in income drive repayment programs, and they are substantially less likely to default," he said. "You never want to be fighting with your regulatory, but we really felt like we had no particular choice here just given the facts as they exist in our portfolio versus the accusations."

Navient's best option might be to wait to see how President Trump handles the CFB. The agency was created by former President Obama and its formation was opposed by Republicans. Some conservative lawmakers have asked Trump to fire Cordray.

The Navient lawsuit was filed two days before Trump was inaugurated.

Remondi told investors the lawsuit would not impact the business.

For the fourth quarter, core earnings per share just missed analyst estimates. The company reported fourth quarter core earnings per share of 43 cents, missing analyst estimates by a penny. Net income for the quarter was $129 million, a decline from $169 million recorded in the fourth quarter of 2015.

The company blamed the income decline on increased expenses and a drop in revenue collected on interest from loans. Navient's net interest income declined 16.2 percent year over year to $373 million. However, non-interest income inched up 1.7 percent from the previous year to $179 million. Asset recovery revenues rose, while servicing revenues declined.

Navient's federally guaranteed student loans segment generated core earnings of $68 million, a 4.2 percent drop from the 2015 fourth quarter. While earnings generated through private education loans reached $41 million in the quarter, down 26.8 percent from the same quarter last year. In both cases, Navient cited lower net interest income for the core earnings decline.

Navient's total delinquency rate came in at 7.4 percent with a charge-off rate of 2.3 percent.

Contact Jeff Mordock at (302) 324-2786, on Twitter @JeffMordockTNJ or jmordock@delawareonline.com.