Navient Corporation’s (NAVI - Free Report) plea to dismiss a state lawsuit filed against it for alleged deceptive lending practices in Pennsylvania has been rejected. Following this news, the company’s shares declined 2.4%.
The lawsuit, filed in the U.S. District Court for the Middle District of Pennsylvania, accuses Navient of engaging in deceptive lending practices, which have cost billions of dollars to borrowers. Subsequent to this, the company had asked for dismissal of the litigation, which now stands rejected.
The U.S. District Judge Robert Mariani dismissed Navient’s argument that the Consumer Financial Protection Act prevents states from bringing claims when there is already a pending lawsuit by the agency. Notably, the company is facing lawsuits from Illinois, Washington, California, Mississippi and the Consumer Financial Protection Bureau over similar charges.
The lawsuit, relating to the period mainly between 2004 and 2014, alleged the company of offering predatory loans to college students with poor credit. These students attended colleges with a very low graduation rate, which increased their possibility of not being able to complete their degrees. Ultimately, the borrowers were not being able to repay their loans.
Also, there were claims that the company expanded subprime loan offerings that were at greater risk of default.
At the time of filing of the lawsuit in October 2017, Pennsylvania attorney general, Josh Shapiro had said, “Navient's deceptive practices and predatory conduct harmed student borrowers and put their own profits ahead of the interests of millions of families across our country who are struggling to repay student loans.”
Notably, this not the first time that the company’s plea to dismiss similar cases have been rejected. Earlier, Navient’s motions to dismiss claims have failed in three lawsuits related to similar allegations.
Navient, which was once part of Sallie Mae (SLM - Free Report) , continues to face with several litigation issues amid the heightened regulatory scrutiny over alleged anti-consumer practices in the U.S. student loan industry. These are expected to hurt the company’s financials.
Shares of Navient have lost 30.4% over the past year compared with a decline of 23.7% for the industry it belongs to.
Currently, Navient carries a Zacks Rank #2 (Buy).
Other Stocks Worth a Look
A couple of stocks in the same industry worth considering are Credit Acceptance Corporation (CACC - Free Report) and Enova International, Inc. (ENVA - Free Report) . Both sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Credit Acceptance has witnessed an upward earnings estimate revision of 3.4% for the current year over the past 60 days. Its share price has increased 14.6% in the past year.
Enova International’s shares have gained 22.4% in a year’s time. Its Zacks Consensus Estimate for current-year earnings has been revised 2.8% upward in the past 60 days.
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