The CFPB has filed an amicus brief in the U.S. Court of Appeals for the Third Circuit in the Pennsylvania Attorney General’s lawsuit against Navient Corp.  The PA AG’s lawsuit includes claims that Navient violated the Consumer Financial Protection Act’s UDAAP prohibition in connection with its servicing of student loans.  In its amicus brief, the CFPB supports the PA AG’s position that Pennsylvania’s federal UDAAP claims can proceed in parallel to similar UDAAP claims asserted by the CFPB in its lawsuit against Navient.

The CFPB filed its lawsuit against Navient in January 2017 in the federal District Court for the Middle District of Pennsylvania.  In August 2017, the court denied Navient’s motion to dismiss the CFPB’s lawsuit.

In October 2017, the PA AG’s lawsuit against Navient was filed in the same PA federal court.  The complaint includes nine counts, four of which allege federal UDAAP claims.  In December 2017, Navient filed a motion to dismiss the PA AG’s complaint in which it asserted that because the four UDAAP claims were duplicative of the Bureau’s claims, they were not authorized by the CFPA.  In December 2018, the district court denied Navient’s motion, ruling that the CFPA did not bar the PA AG’s UDAAP claims.

The district court thereafter granted Navient’s motion to certify the denial of its motion to dismiss.  The Third Circuit granted Navient’s petition for interlocutory review but certified for review only two of the three issues certified by the district court.  One of the issues certified by the Third Circuit was whether the PA AG “could bring a parallel enforcement action under the Consumer Financial Protection Act after the Consumer Financial Protection Bureau has filed suit.”

CFPA Section 1042 (12 U.S.C. Section 5552) authorizes “the attorney general (or the equivalent thereof) of any State” to bring a “civil action…to enforce the provisions of [the CFPA] or regulations issued under [the CFPA].”  Section 1042 includes limits on such authority and conditions that a state must satisfy to exercise such authority, including that it must notify the Bureau before filing a CFPA claim and provide a description of the action.  It also gives the CFPB a right to intervene in the state’s lawsuit.

In its amicus brief, the CFPB makes the following principal arguments:

  • Nothing in Section 1042, including the CFPB’s right to intervene in a state’s lawsuit, bars parallel enforcement actions to enforce the CFPA.
  • Concerns about judicial resources do not justify dismissing the PA AG’s complaint.
  • Navient’s constitutional arguments were waived because they were not raised below and in any event there is no merit to Navient’s arguments that if Section 1042 permits parallel actions, it would violate the Take Care and Appointments Clauses of the U.S. Constitution.

In our webinar yesterday, Nicholas Smyth, who leads the Pennsylvania Attorney General’s Consumer Protection unit, was our guest speaker.  Nick mentioned the CFPB’s amicus brief in connection with his discussion of the unit’s close cooperation with the CFPB on enforcement matters.