SCRANTON, Pa. (Legal Newsline) – A Pennsylvania federal judge has ruled that the Consumer Financial Protection Bureau’s lawsuit against the nation’s largest student loan servicer shouldn’t be thrown out just because the CFPB was operating in an unconstitutional manner when it filed suit.
Judge Robert Mariani in Scranton reached that decision Jan. 13 in response to Navient’s attempted use of last year’s Seila Law ruling from the U.S. Supreme Court, which held the CFPB’s director was answering to no one.
Following the SCOTUS ruling, the CFPB ratified its decision to sue Navient, which it did in 2017, but Navient argued that ratification shouldn’t be allowed.
“Navient’s assertion that the CFPB ‘never had constitutional authority to bring this action’ is belied by Seila’s implicit finding that the CFPB always had the authority to act, despite the Supreme Court’s finding that the removal protection was unconstitutional,” Mariani wrote.
“The Supreme Court left the agency, and its ability to act, intact, and specifically found that ‘The provisions of the Dodd-Frank Act bearing on the CFPB’s structure and duties remain fully operative without the offending tenure restriction.”
It would not be right to let all the targets of CFPB actions off the hook because of the Seila ruling, Mariani wrote.
Navient still has another pending motion for judgment that refutes the CFPB’s allegation.
The lawsuit claims Navient pushes forbearance, in which payments are suspended as interest continues to grow, on students struggling to pay back loans.
The company has claimed it is an effort to regulate its practices through litigation and 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.
Navient’s motion 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.