In Consumer Fin. Prot. Bureau v. Nat’l Collegiate Master Student Loan Trust, the District of Delaware dismissed a lawsuit brought by the Consumer Financial Protection Bureau (CFPB), alleging that a group of trusts that hold more than 800,000 private student loans engaged in unfair and deceptive practices. The District Court held that the CFPB’s attempt to ratify its prosecution was untimely and, therefore, constitutionally flawed in light of the Supreme Court’s decision in Seila Law LLC v. Consumer Financial Protection Bureau.

In 2017, the trusts entered into a consent judgment with the CFPB, which the court denied due to a lack of authority by the trusts’ counsel. Several entities with financial interests in the loans held by the trusts intervened, arguing that the court lacked subject matter jurisdiction or alternatively that the CFPB’s action was now untimely.

Definition of “Covered Persons”

The intervenors argued that as “paper entities” with no employees or management, the trusts were not “covered persons” within the meaning of the Consumer Financial Protection Act (CFPA), thus the court did not have jurisdiction to hear the CFPB’s complaint. In rejecting this argument, the court held that even if the trusts were not “covered persons,” such a deficiency would not be jurisdictional. The court applied a bright line test to determine whether it had jurisdiction: “whether Congress has clearly stated that the rule is jurisdictional.” The sole section in the CFPA addressing subject matter jurisdiction simply states that “an action or adjudication proceeding brought under Federal consumer financial law.” The court also noted “covered persons” appears throughout the statute, and nowhere is jurisdiction referenced.

The court did hint that it may agree with the intervenors’ argument that the trusts were not “covered persons” within the meaning of the CFPA. However, it ultimately determined that whether the trusts are “covered persons” was not a jurisdictional requirement.


The intervenors also argued that in light of the Supreme Court’s decision in Seila Law, the CFPB’s attempt to ratify the complaint was untimely. The District Court agreed.

In Seila Law, the Supreme Court held that the structure of the CFPB, which provides that the president may only remove its director for inefficiency, neglect, or malfeasance — and not at will — violated the separation of powers under the U.S. Constitution. However, the Supreme Court also noted that an enforcement action that the CFPB had filed while its structure was unconstitutional may still be enforceable, if it was later ratified.

In assessing whether the CFPB properly ratified the enforcement action against the trusts, the court applied Third Circuit precedent requiring that (1) “the ratifier must, at the time of ratification, still have the authority to take the action to be ratified”; (2) “the ratifier must have full knowledge of the decision to be ratified”; and (3) “the ratifier must make a detached and considered affirmation of the earlier decision.” The court keyed on the first requirement.

The court disagreed with the CFPB’s argument that its ratification after the Seila Law decision was effective, even though the statute of limitations had run, because the initial filing of the complaint satisfied the purpose of encouraging plaintiffs to diligently pursue their rights. The court reasoned that if an agency was allowed to ratify unauthorized action after the statute of limitations had run, it “would have the unilateral power to extend the … statutory period for filing by days, weeks, or as in this case, even longer.”

Likewise, the court also rejected the CFPB’s request to equitably toll the statute of limitations because the CFPB “could not identify a single act that it took to preserve its rights in this case in anticipation of the constitutional challenges.”


This decision may influence other pending CFPB enforcement actions where the statute of limitations has expired. What may be more noteworthy is whether passive securitization entities could be deemed “covered persons” under the CFPA and potentially liable for third-party misconduct, which could have enormous impact on the securitization industry. While the District Court did ultimately punt on the issue, it did say that it “harbors some doubt” as to whether “covered persons” applies to such trusts.