In a letter to the Securities Exchange Commission, the AFL-CIO urged the commission to investigate possible insider trading of Navient stock.
Navient collects and services student loans worth $300 billion for more than 12 million borrowers, making it the largest student loan servicer in the US.
The letter from Heather Slavkin Corzo, director of the AFL-CIO’s Office of Investments, says that suspicious trading activity took place on August 31 just hours before the US Department of Education announced a highly favorable decision for Navient.
The day after the announcement was made, Navient stock increased by 4 percent.
On August 31, the Department of Education notified the Consumer Financial Protection Bureau (CFPB) that the department would no longer share information about Navient and other student loan processors with CFPB.
This decision was good news for Navient because in January CFPB filed a suit against Navient for cheating borrowers out of their rights to lower payments in order to boost its profits.
Without information about Navient from the Department of Education, CFPB will have a more difficult time pursuing its claims for millions of dollars in restitution for borrowers affected by Navient’s actions.
After CFPB was notified, hours elapsed before the department’s notification was made public.
During the time between the notification and its announcement, nearly 900,000 shares of Navient stock were purchased in three separate transactions near and after the close of the market.
After the transactions were completed and after the department’s notification was made public, Navient shares jumped from $13.20 a share to $13.75 a share.
A Navient spokesperson denies that Navient had advanced knowledge of the department’s notification.
CFPB’s January suit against Navient alleges that the company failed to provide the most basic information needed by borrowers who qualified for reduced loan payments.
“Navient provided bad information in writing and over the phone, processed payments incorrectly, and failed to act when borrowers complained about problems,” states the CFPB in a media statement about the suit.
“Critically (Navient) systematically made it harder for borrowers to obtain the important right to pay according to what they can afford. These illegal practices made paying back student loans more difficult and costly to certain borrowers,” continues the statement.
These allegations were not the first time that Navient has run afoul of federal regulators.
In 2014, Navient agreed to pay $97 million to settle a charge that it violated the Service Members Civil Rights Act.
The Justice Department charged Navient with overcharging more than 78,000 active duty service members on their student loan payments.
According to the Justice Department, Navient failed to provide service members with the 6 percent interest rate cap to which they were entitled under the law.
Navient agreed to pay $60 million to service members affected by the overcharge, $55,000 in civil penalties, and to request that credit bureaus delete negative information on service members credit histories caused by the overcharges.
The Education Department cooperated with the Justice Department in its investigation of Navient and provided important information that helped the department reach a favorable settlement.
But the times have changed, and under the new leadership of Secretary Betsy DeVos, the Education Department appears to have decided that cooperating with federal regulators to protect student loan borrowers is regulatory overreach.
That’s good news to Navient, its executives, and its large investors who can afford to buy big chunks of stock.
That big chunks of Navient stock were bought during such a narrow window of opportunity raised suspicions by the AFL-CIO, which is an investor in Navient and in the past has worked vigorously to promote good corporate governance at Navient and other companies.
Corzo told Bloomberg that the fortuitous purchases of such a large number of shares at just the right time was “unusual” and added that “insider trading undermines the fairness of financial markets.”