On January 13, Navient Corp. (Navient), once the largest student loan servicer in the nation, reached a $1.85 billion settlement with a bipartisan coalition of 39 state attorneys general (State AGs) and a contemporaneous resolution with the Mississippi attorney general. The settlement resolves these State AGs’ investigations related to Navient’s lending practices, which we have analyzed in detail. Importantly for all companies that may be the subject of a State AG investigation, Navient’s multistate agreement demonstrates the complexity of obtaining global peace — specifically, a release of liability from all investigating regulators and private actions.

Regulatory Scrutiny

Based on publicly available information, Navient’s business practices garnered scrutiny from State AGs, the federal government, and the plaintiffs’ bar, including:

• A multistate AG investigation;
• Lawsuits filed by California, Illinois, Mississippi, New Jersey, Pennsylvania, and Washington;
• Lawsuit by the Consumer Financial Protection Bureau (CFPB); and
• Multidistrict and class-action lawsuits.

As we have discussed, multifront regulatory investigations are becoming increasingly common. This is because a company’s practices often implicate the statutory directives of multiple regulators. Therefore, if one regulator takes action or opens an investigation, other regulators may take action to achieve different priorities, even if the issue involves the same conduct.

Navient’s January 13 Resolution Achieves Partial Peace …

When faced with multiple regulatory fronts, many companies prefer to resolve the pending litigation and investigation through one concurrent settlement. This enables a business to move forward in quick succession after a settlement, instead of having multiple settlements occurring over an extended time period. However, that is often much easier said than done.

The Navient resolution represents a success since Navient reached a resolution with the multistate attorney general working group and with the six states that independently sued Navient. This is no small feat because states that sue independently can be vested in extracting more money and stricter injunctive relief than State AGs who are part of a working group. Moreover, one of the states, Mississippi, retained outside counsel to represent the state in litigation. In doing so, Navient likely responded to additional priorities, including the monetary expectations of outside counsel.

… But Not Global Peace

The resolutions announced by Navient and State AGs do not provide complete peace, as the following actions will likely move forward.

Actions By the Federal Government and Plaintiffs’ Bar: Navient is currently involved in litigation with the CFPB, with a trial date still pending. Additionally, Navient must continue to defend multidistrict litigation and class-action lawsuits from both student borrowers and investors.

Potential Actions By Other State AGs: Although Navient resolved the investigation by 40 State AGs, 11 states did not participate — Alabama, Alaska, Idaho, Montana, New Hampshire, North Dakota, Oklahoma, South Dakota, Texas, Utah, and Wyoming. While it may be purely coincidental, these 11 states all have Republican attorneys general, and it is possible that a separate investigation may be ongoing. If not, given that the media has already noted that “[e]leven states, including Texas, did not take part” and that their state citizens are not eligible for relief under the multistate settlement, some or all of these states now may take action.

Our Take

The goal of obtaining a global release of all potential liability from all regulators is desirable for targeted companies. However, such a goal is increasingly difficult, given the increased likelihood that a company will face simultaneous investigations and litigation from the state and federal government, along with private actions.

In response, companies should adopt a proactive regulatory response to avoid the inevitable — known and unknown — pitfalls that occur during multifront regulatory investigations. Doing so increases the likelihood that a company can implement a strategy for global peace.