*

CFPB redress payments to Navient ( NAVI ) borrowers in limbo

*

Compensation payouts to be made amount to hundreds of

millions

of dollars

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Idled agency staff unable to review, approve payments,

sources

say

By Douglas Gillison

March 3 (Reuters) - The Trump administration's decision

to put the U.S. Consumer Financial Protection Bureau on ice has

left a $100 million pot of money intended for borrowers

allegedly harmed by the student loan servicer Navient ( NAVI )

sitting in limbo, according to an advocacy organization.

The agency's work stoppage also calls into question the fate

of potentially hundreds of millions of dollars of separate

payouts from financial services companies like Cash App parent

Block, TD Bank and the lending arm of Honda,

which have been ordered to compensate allegedly harmed

consumers, two people familiar with CFPB's operations say.

Without authorization from the agency, the payouts cannot go

forward, the sources said.

After a seven-year legal battle, Navient ( NAVI ) agreed in September

to pay $100 million to the CFPB so that the agency could mail

checks to student loan borrowers whose costs it said Navient ( NAVI ) had

for years illegally increased in a variety of ways. Navient ( NAVI ) said

it disagreed with the CFPB's findings.

The Trump administration's decision to stop work at the

agency appears to have halted this compensation, however,

according to the Student Borrower Protection Center, which

litigates on behalf of student borrowers and advocates for

policy in Washington.

"If the Navient ( NAVI ) checks had rolled out as expected in 2025,

we would be hearing from people," said Mike Pierce, head of the

Center. "I do feel confident in saying that the Navient ( NAVI )

restitution is not being distributed right now."

Pierce, who previously worked on the Navient ( NAVI ) case as a

former CFPB official, said the agency was under court order to

distribute the funds. Reuters could not determine whether there

was a specific deadline for when payments should be approved or

paid out to parties due compensation.

Navient's ( NAVI ) name does not appear among a list of cases on the

CFPB's website for which regular compensation payments are

underway. The website's home page remains dysfunctional and the

site does not appear to have been updated since coming under the

new administration's control.

Navient ( NAVI ) declined to comment. Representatives for the White

House, CFPB and Block did not respond to queries from Reuters.

TD Bank declined to comment while Honda referred questions back

to the CFPB.

COMPENSATION PAYMENTS

Trump has said the CFPB should be eliminated, accusing it of

politicized enforcement, and last month the agency's acting

director Russ Vought ordered a halt to all work with only

limited exceptions. Government lawyers and agency officials have

said in court papers the CFPB will continue to exist in some

"streamlined" form.

The CFPB's operating funds are drawn from the Federal

Reserve but the payments it delivers to consumers deemed to be

harmed by corporate misconduct derive from sums collected from

the companies it oversees.

Since it began operations in 2013, the agency says it has

returned $21 billion to the public through such compensation, as

well as canceled consumer debts, reductions on loan principal,

and other means.

It disburses payments in a number of ways.

In a sworn statement last month, CFPB Chief Operating

Officer Adam Martinez said the agency continued to distribute

"approved payments" from its civil penalty fund, which contains

the proceeds of corporate fines used to compensate victims.

The Navient ( NAVI ) funds would fall into a separate category,

however, known as "bureau-administered redress," in which the

agency, rather than the company itself, disburses compensation

paid by the company.

In order to determine how the $100 million payout should

be distributed, the CFPB requires analysis from an outside firm,

Bates White, which the agency hired to provide expert testimony

for the Navient ( NAVI ) lawsuit, according to one of the sources.

Data published by Elon Musk's Department of Government

Efficiency last month showed the CFPB had canceled the Bates

White contract. Bates White did not respond to a request for

comment.

As of Friday, agency leadership had also not given the green

light to officials to resume reviewing and approving plans for

companies themselves to distribute consumer redress payments

directly, according to the sources, indicating that the payment

plans would not be able to move ahead.

Since September, when the CFPB reached the Navient ( NAVI )

settlement, the agency has ordered eight other companies to make

consumer redress payments totaling between $202.6 million and

$247.6 million.

Deadlines have not yet lapsed for three of those companies -

Block, American Honda Finance Corporation and the money transfer

business Wise, which were together ordered to pay $85.8 million

- to submit redress payment plans, also raising doubts as to

whether the CFPB will be able to approve them.

"I've never heard of a situation in which after a settlement

is reached the victor stops moving forward," said David

Silberman, a visiting lecturer in consumer finance law and

former senior CFPB official.

"It's not money that belongs to the bureau."