Navient Corp. President and CEO Jack Remondi reiterated and amplified the company's pointed criticism of the claims brought against it by the Consumer Financial Protection Bureau and two state attorneys general in recently filed lawsuits, while he vowed to ensure the legal action will not become a distraction to the business.
"You never want to be fighting with your regulator, but we really felt like we had no particular choice here," Remondi said during a Jan. 25 conference call.
He alleged that the CFPB and attorneys general had "disregarded the facts in order to make a political statement ... based on a false narrative about the practices and outcomes Navient delivers for borrowers."
The CFPB claimed, among other things, that Navient had "failed consumers" and chose to "shortcut and deceive" them "[a]t every state of repayment ... to save on borrowing costs. But rather than having "illegally cheated" consumers as the agency alleged through actions such as steering "many borrowers" into forbearance programs, Remondi blasted the CFPB for seeking to apply new servicing standards retroactively rather than engage in a rulemaking process.
"It's inconceivable and disappointing that these very helpful services would be portrayed as harmful," Remondi said in explaining the purpose and success of Navient's forbearance program. "The irrefutable facts are that Navient-serviced borrowers are more likely to be enrolled in alternative payment plans including [income-driven repayment plans]. Navient borrowers are also less likely to be severely delinquent and, ultimately, are 31% less likely to default. This is the exact opposite of borrower harm."
Remondi later opined that he does not believe the CFPB's perspective on Navient's business is "uniformly shared" in Washington, D.C., and the company is working to "communicate and demonstrate how we deliver borrower success."
In response to a question from Leon Cooperman of Navient investor Omega Advisors Inc. about whether the company had considered "just giving everybody back their money and just going out of business and letting the government worry about this," Remondi said he believes the company has "real opportunities" for growth in 2017 and beyond.
"We think at the end of the day, we create more value for shareholders by running our business than we do by not," he said.
In fact, Remondi added, the CFPB action might generate additional opportunities for Navient to pursue one of its "legacy" growth opportunities through additional acquisitions of Federal Family Education Loan Program portfolios as it could "accelerate the desire" of holders to sell. The company acquired about $3.5 billion in FFELP loans during 2016, and its 2017 guidance contemplates purchases at a similar level.
The company offered 2017 guidance during the call for core EPS of between $1.80 and $1.84 and a full-year FFELP net interest margin in the high 70s in terms of basis points. It reported core EPS of $1.82 and adjusted core EPS of $1.89 for full year 2016. The 2016 FFELP net interest margin was 85 basis points.
Remondi told The Washington Post in a recent interview that he believes the CFPB has concluded that servicers like Navient are the reason that student loan borrowers default. He conceded that the company does make mistakes in its servicing practices "from time to time."
But, he asked rhetorically, "If we were doing such a crappy job for consumers, why are our results [in reference to the number and percentage of borrowers in income-driven repayment plans and relative to severe delinquencies and defaults] so much better than any other servicer?"