By Douglas Gillison
The decision by the Trump administration to freeze the U.S. Consumer Financial Protection Bureau has raised concerns about the fate of $100 million earmarked for borrowers affected by student loan servicer Navient. An advocacy organization reports that this money, along with hundreds of millions of dollars from financial institutions like Cash App’s parent company Block, TD Bank, and Honda’s lending division, intended to compensate harmed consumers, is now in limbo due to the agency’s halt in operations.
Without the agency’s approval, these payouts are currently on hold, according to sources familiar with the CFPB’s activities. The CFPB had reached a settlement with Navient in September for $100 million, aiming to distribute restitution to student loan borrowers allegedly impacted by Navient’s improper practices. However, this compensation process has been stalled following the agency’s shutdown.
The Student Borrower Protection Center has expressed concerns about the delayed distribution of funds, emphasizing the importance of compensating affected individuals. Mike Pierce, the Center’s head and a former CFPB official, highlighted the legal obligation for the agency to disburse the funds, although specific timelines for payments remain unclear.
The CFPB’s website does not list Navient’s case among ongoing compensation payments, indicating a lack of progress in resolving this issue. Furthermore, the website remains outdated, reflecting the agency’s inactivity under the current administration.
While Navient declined to comment, responses from the White House, CFPB, and other involved parties were not provided. The Trump administration’s stance on the CFPB, coupled with the agency’s operational freeze, has created uncertainty regarding compensation disbursements and the future of the CFPB itself.
Despite these challenges, the CFPB emphasizes its commitment to consumer protection through compensation programs. Under the agency’s mandate, it has returned billions of dollars to the public since its establishment in 2013, benefiting consumers through various forms of relief.
As the situation unfolds, questions linger about the fate of the stalled payments and the broader impact of the CFPB’s current state.
The Consumer Financial Protection Bureau (CFPB), responsible for disbursing compensation paid by companies, faces a challenge in determining the distribution of a $100 million payout. To aid in this process, the CFPB solicited analysis from an external firm, Bates White, which had been retained by the agency to provide expert testimony in the Navient lawsuit. Recent disclosures suggest that the CFPB terminated its contract with Bates White as revealed in data released by Elon Musk’s Department of Government Efficiency. Despite this development, Bates White has not provided any comments on the matter.
As of the most recent update on Friday, the CFPB’s leadership had not given approval for officials to proceed with reviewing and authorizing the payment plans for companies to directly disburse consumer redress payments. This delay indicates that the implementation of payment plans may be stalled. Since reaching a settlement with Navient in September, the CFPB has directed eight other companies to make consumer redress payments ranging from $202.6 million to $247.6 million.
For three of these companies – Block, American Honda Finance Corporation, and Wise, collectively instructed to pay $85.8 million – the deadlines for submitting redress payment plans have not yet expired, casting uncertainty on the approval of these plans by the CFPB. The situation has raised concerns among experts, with David Silberman, a former senior CFPB official and current visiting lecturer in consumer finance law, expressing surprise at the slow progress post-settlement. He emphasized that the funds at stake do not belong to the bureau.
Information reported by Douglas Gillison underwent editing by Megan Davies and Nia Williams for clarity and accuracy.
