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Richard Cordray, director of the Consumer Financial Protection Bureau, has filed a lawsuit against student loan servicer Navient.

(Jacquelyn Martin, Associated Press)

CLEVELAND, Ohio - The Consumer Financial Protection Bureau is suing Navient, formerly known as Sallie Mae Inc., arguing the company "illegally failed (student) borrowers at every stage of repayment."

The lawsuit, filed Wednesday in U.S. District Court in Pennsylvania, said Navient, the nation's largest company to help student loan borrowers, "has failed to perform its core duties in the servicing of student loans, violating Federal consumer financial laws as well as the trust that borrowers placed in the company."

Navient services the loans of more than 12 million borrowers, including more than 6 million customer accounts under a contract with the U.S. Department of Education, the lawsuit said. It services more than $300 billion in federal and private student loans, which is more than a quarter of all borrowers in the United States.

The company's responsibilities include managing borrowers' accounts; processing monthly payments; assisting borrowers in alternative repayment plans; and communicating directly with borrowers about repayment.

Since 2012, more than 400 Ohioans, including service members and seniors, have submitted complaints about Navient, U.S. Sen. Sherrod Brown said in a statement.

"The allegations that Navient cheated borrowers, including veterans with disabilities, going back at least five years are disturbing to say the least," Brown said.

Bureau Director Richard Cordray, the former Ohio attorney general, said in a statement that the government agency found Navient created obstacles to repayment by providing bad information, processing payments incorrectly and failing to act when borrowers complained.

"The company also used shortcuts and deception to illegally cheat struggling borrowers out of their rights to lower payments, which caused them to pay much more than they had to for their loans," said Cordray. "These unlawful practices have cost student loan borrowers across the country both heartache and money. And we are working to make sure they do not happen again."

The offices of the attorneys general in Illinois and Washington filed similar lawsuits against Navient.

Navient said in a statement that "the allegations of the Illinois Attorney General and Consumer Financial Protection Bureau are unfounded, and the timing of these lawsuits--midnight action filed on the eve of a new administration--reflects their political motivations."

The company said it "has a well-established, superior track-record of helping student loan borrowers succeed in repayment." The lawsuits "improperly seek to impose penalties on Navient based on new servicing standards applied retroactively and applied only against one servicer."

As Donald Trump prepares to take office, Republicans are trying to weaken the power of the consumer watchdog agency, creating under Dodd-Frank reforms President Obama signed in 2010.

Some members of Congress have questioned whether the agency is exceeding its legislative authority in regulating student loans and other financial products and services, Inside Higher Ed reported.

"The action by the CFPB against Navient demonstrates the importance of having a strong and independent consumer watchdog on the side of students and working families," said Persis Yu, director of the National Consumer Law Center's Student Loan Borrower Assistance Project, in a statement. "We call on President-elect Trump to reject calls from Wall Street to fire CFPB Director Rich Cordray or to weaken the consumer watchdog."