A class action lawsuit has been filed in California alleging that Sallie Mae, which is now known as Navient, is charging excessively high late fees on private student loans.
According to the lawsuit, Sallie Mae (now Navient) charges a late fee of 5% for each missed payment on private student loans. The lawsuit alleges that these late fees are unlawful because they do not bear a relationship to the actual costs incurred by Sallie Mae or Navient in processing the missed payments. Under California’s consumer protection laws, the late fee must be based on Sallie Mae’s actual cost associated with processing a late payment.
The class action also alleges that the 5% rate is exorbitant because it is equivalent to an annual interest rate of 120 percent. In addition to the late fee, Sallie Mae continues to charge regular interest on the missed payment amount, causing the borrower to pay Sallie Mae twice for being late on a single loan payment.
Sallie Mae’s private education loans are loans made by Sallie Mae to students to pay for the cost of education. These private student loans were marketed by Sallie Mae as “Signature Loans,” “Signature Student Loans” and “Signature Select Loans” and are not Federal Family Education Loans, which are insured by the federal government. In some instances, the private education loan may have been originally provided by a bank, lending agency, or financial services firm, but is now serviced by Navient.
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