In December, Judge Robert D. Mariani denied Navient’s motion to dismiss a lawsuit filed by the Commonwealth of Pennsylvania, ruling that the suit is not pre-empted by a similar case filed against the company by the Consumer Financial Protection Bureau. In the suit, the Commonwealth seeks to hold Navient liable for student loan collection activity that allegedly harmed borrowers both in Pennsylvania and nationwide.
Specifically, the Commonwealth alleges that Navient committed a variety of abusive practices in violation of the Consumer Financial Protection Act (“CFPA”) and Pennsylvania’s unfair trade practices and consumer protection law (“CPL”). The Commonwealth’s case is similar to a parallel action pending in the same court involving the CFPB. The motion to dismiss claimed that the Commonwealth’s complaint is “essentially cut and pasted from the CFPB’s long ago filed complaint.” But the judge, in denying the motion, rejected Navient’s argument that the Commonwealth’s action is merely a “copycat” of the CFPB suit that “unnecessarily burden[s] the courts and parties, and would risk generating inconsistent rulings across the country.”
“While Navient’s arguments are creative, they do not convince the Court that the CFPA prohibits concurrent state enforcement actions,” wrote Judge Mariani. “Following Navient’s position would require the Court to accept an amalgam of tenuous postulates regarding several provisions of the CFPA and a strained reading of the plain text of the statute.” Because concurrent enforcement actions are barred in other areas of the CFPA, but not in the section relevant to this particular case, “applying the canon of statutory interpretation [holding that where Congress includes language in one section but omits it in another, it is presumed Congress acts intentionally] is particularly appropriate.” The Court also ruled that other federal statutes – the Truth in Lending Act and Higher Education Act – do not pre-empt the Commonwealth’s claims.
The opinion marks the latest development in a years-long battle among the federal government, states, and student loan companies over whether and how states can regulate the firms, which are also contractors of the Department of Education. Navient, a Delaware-based student loan management company and formerly a part of Sallie Mae, is facing similar suits in other states, including Illinois, California, Mississippi, and Washington. Navient’s motion to dismiss the Illinois Attorney General’s suit (based on the same preemption argument) was denied in July.
In early 2018, Secretary of Education Betsy DeVos issued a memo backing student loan servicers. In the memo, the Department maintains that state rules and regulations aimed at greater consumer protection undermine the federal government’s goal of a single streamlined federal loan program. State attorneys general have accused the Department of Education of rolling back protections for borrowers for some time now—a coalition of thirty attorneys general recently formed in opposition to portions of the Higher Education Act reauthorization, also known as the PROSPER Act. States likely will continue to pursue similar claims against Navient in light of the recent rulings against preemption in this context.