Banking and Finance Law Daily States say CFPA authorizes their enforcement whether or not CFPB has acted
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Thursday, September 5, 2019

States say CFPA authorizes their enforcement whether or not CFPB has acted

By Nicole D. Prysby, J.D.

Attorneys General from 32 jurisdictions argue in an amicus brief that they are authorized to enforce the CFPA regardless of whether the CFPB has already begun an enforcement action.

Attorneys General from 31 states and the District of Columbia argue that the Consumer Financial Protection Act (CFPA) authorizes their enforcement whether or not the Consumer Financial Protection Bureau has already acted. The AGs made the argument in an amicus brief filed in the federal Third Circuit Court of Appeals in an appeal by Navient Corporation after Navient failed to have claims against it brought by the Pennsylvania AG dismissed. Navient argued in the district court that the CFPA precludes Pennsylvania from bringing a parallel enforcement action that is similar to a claim already brought by the CFPB and that Pennsylvania’s consumer protection law is preempted by the Higher Education Act (Commonwealth of Pennsylvania v. Navient Corp., Case No. 19-2116).

As previously reported, the Pennsylvania AG filed a complaint against Navient in 2017, alleging that the company violated the CFPA and Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (CPL). More specifically, the Pennsylvania AG claimed Navient harmed student loan borrowers by marketing risky and expensive subprime student loans that it knew, or should have known, were likely to default and by making misrepresentations while steering borrowers into costly forbearances instead of enrolling them into more affordable income-driven repayment plans. The district court rejected arguments from Navient that the claims should be dismissed because the CFPA precludes Pennsylvania from bringing a parallel enforcement action that is similar to a claim already brought by the CFPB and that the CPL is preempted by the Higher Education Act (see Banking and Finance Law Daily, Dec. 19, 2018). Navient appealed, and both Navient and the Pennsylvania AG have filed initial briefs with the Third Circuit. State attorneys general from 31 states and the District of Columbia signed on to a brief filed in support of Pennsylvania.

The amici states argue that the CFPA authorizes their enforcement whether or not the CFPB has already acted. The notice and intervention provisions in the CFPA are consistent with concurrent state enforcement action—for example, the notice provision (12 U.S.C. § 5552(b)(1)(C)(iii)) expressly contemplates that there may already be a pending CFPB "action" at the time of the state’s pre-suit notice. The statute’s use of the word "action" is not (as Navient argues) limited to pending regulatory actions. Contrary to Navient’s suggestion that pre-suit notice would be futile where the CFPB has already filed a lawsuit, such notice is arguably most useful when the CFPB is engaged in pending litigation, because notice gives the agency an opportunity to coordinate with the state to ensure that neither party assumes a litigation position that would undermine the other’s action. The CFPA also allows the CFPB to intervene in a state’s action under appropriate circumstances (12 U.S.C. section 5552(b)(2)) which is consistent with concurrent state enforcement actions. Where Congress did seek to limit states’ enforcement authority under the CFPA, it did so expressly. For example, states cannot enforce mortgage regulations promulgated by the CFPB when the federal agency has already initiated an action against a party. In addition, there is no merit to Navient’s complaints that concurrent state enforcement actions "waste judicial resources and create inconsistency" and that "serious constitutional concerns" would arise if fifty state attorneys general were able "to enforce federal law independent of the President" or other federal authority. No court has ever found that the Constitution forbids Congress from conferring enforcement authority on anybody other than a federal officer or agency.

The state AGs also argue that exempting student loan servicers from state consumer protection laws would leave millions of Americans vulnerable to unfair and deceptive practices and that states are uniquely positioned to protect their own residents from these practices. Also, the Higher Education Act does not preempt state consumer protection laws because its express preemption provision is narrow and only applies to state laws compelling specific disclosures, and there is no conflict between the Higher Education Act and state consumer protection laws.

Attorneys: John Abel, Office of Attorney General of Pennsylvania, for Commonwealth of Pennsylvania. Daniel T. Brier (Myers Brier & Kelly) for Navient Corp.

Companies: Navient Corp.

MainStory: TopStory CFPB DelawareNews EnforcementActions Loans NewJerseyNews PennsylvaniaNews Preemption VirginIslandsNews UDAAP

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