HARRISBURG – Too little, too late, says the nation’s largest student loan servicer to the federal agency that has pursued litigation against it for three years.
On Aug. 5, Navient made its argument against the “ratification” of the Consumer Financial Protection Bureau’s lawsuit against it. After the CFPB’s structure was found unconstitutional earlier this year by the U.S. Supreme Court, director Kathleen Kraninger filed an affidavit ratifying the case, which was filed in 2017.
It wasn’t valid, Navient argues, because the statute of limitations has expired on CFPB’s claims.
“Because Director Kraninger could not have instituted this lawsuit on July 9, 2020, based on the expiration of the statute of limitations, she also lacked the power to ratify the suit,” a reply memorandum in the U.S. District Court for the Middle District of Pennsylvania says.
“Thus, the ratification came ‘too late in the day to be effective,’ and the suit must be dismissed.”
Navient, the nation’s largest student loan-processor, filed a motion for judgment on July 10, some three years after the CFPB filed suit against it. The lawsuit claims Navient pushes forbearance on students struggling to pay back loans.
The company has claimed it is an effort to regulate its practices through litigation and that actual education agencies – and not the CFPB, which tracks financial institutions – should be in charge of any changes.
Navient is armed with a former CFPB lawyer who will testify against the agency, much to CFPB’s dismay.
Now added to its ammo is the Seila Law decision recently reached by the Supreme Court that said under the Obama-era creation of the CFPB, its director was placed in a position of power that left him or her accountable to no one – not even the President, who was unable to fire the director.
That was unconstitutional, SCOTUS ruled. Navient says it shows the CFPB never had constitutional authority to bring the lawsuit in the first place.
Four days after the motion, CFPB director Kathleen Kraninger tried anyway. She filed a declaration with Judge Robert Mariani that she has ratified the decision to file suit made by Obama’s CFPB head, Richard Cordray.
It would be the second win in recent months for CFPB if Judge Mariani grants its motion. It recently settled a class action lawsuit brought by teachers who were eligible for loan forgiveness for far less than what plaintiffs lawyers hoped for.
Their case was pared down to only one claim last year, and plaintiffs lawyers say they lost $5 million in the settlement.
Navient’s motion in the CFPB’s case seeks judgment on 11 claims. It complains that the feds are attempting to impose new regulations through its litigation against Navient rather than going through a proper rulemaking procedure.
Part of that change would be requiring servicers to go through a question-and-answer process designed by the CFPB.
“(T)he CFPB seeks instead to discourage access to a federal prescribed benefit – forbearance – in favor of its preferred option, IDR,” the motion says.