354 F. Supp. 3d 529
M.D. Penn.2018Background
- Pennsylvania AG sued Navient Corporation and Navient Solutions alleging unfair, deceptive, and abusive practices in origination and servicing of federal and private student loans under the CFPA and Pennsylvania Unfair Trade Practices and Consumer Protection Law (CPL).
- Key factual allegations: Navient (and predecessors) used subprime private loans as "bait" to win preferred-lender lists and FFELP/prime volume, loosened underwriting for high-risk borrowers, and concealed credit-enhancing/recourse arrangements that shifted risk from Navient.
- Servicing allegations: Navient allegedly steered borrowers into repeated forbearances rather than income-driven repayment (IDR) plans, made misleading or inadequate IDR recertification notices (many borrowers missed recertification), misrepresented cosigner-release rules, and misallocated or misapplied payments.
- Navient moved to dismiss: argued (1) CFPA bars "copycat" state suits while CFPB pursues similar claims; (2) federal law (HEA, TILA) preempts CPL claims; and (3) various CPL/CFPA claims fail as matter of law (puffery, mere errors, laches, ceased conduct).
- The court denied the motion in full, finding: states may bring concurrent CFPA enforcement actions; HEA and TILA do not preempt the Commonwealth’s CPL claims as pleaded; and the Complaint plausibly alleges unfair, deceptive, or abusive conduct sufficient to survive 12(b)(6).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can a State bring concurrent CFPA claims while the CFPB has a pending action? | Commonwealth: §5552(a)(1) plainly authorizes state suits; notice/intervention provisions do not bar concurrent state enforcement. | Navient: §5552’s notice/intervention scheme and statutory silence show Congress intended to preclude "copycat" state suits. | Court: States may bring concurrent CFPA actions; plain text of §5552(a)(1) controls and notice/intervention provisions do not negate the grant. |
| Does the HEA (20 U.S.C. §1098g) preempt state CPL claims about servicing (forbearance steering and recertification)? | Commonwealth: Claims allege affirmative unfair/deceptive servicing conduct, not mere disclosure violations; presumption against preemption applies. | Navient: §1098g bars "any disclosure requirements of any State law" and uniformity concerns support express and conflict preemption. | Court: HEA does not expressly or conflict-preempt the pleaded CPL servicing claims; alleged affirmative deceptive practices fall outside §1098g's scope. |
| Does TILA preempt CPL origination claims about Navient’s subprime lending? | Commonwealth: Claims allege predatory/origination misconduct, not inconsistent disclosure requirements. | Navient: TILA’s comprehensive disclosure regime occupies the field; CPL would impose additional disclosure obligations. | Court: TILA does not preempt the CPL origination claim where no direct conflict with federal disclosures is alleged. |
| Do CPL/CFPA claims fail as a matter of law (puffery, mere mistake, laches, moot/ceased conduct)? | Commonwealth: Allegations show concrete misrepresentations, steering, systemic errors, and public‑interest enforcement; intent not required for CPL/CFPA unfairness. | Navient: Statements are nonactionable puffery; payment issues are innocent mistakes; laches or voluntary cessation bar relief for old conduct. | Court: Complaint plausibly pleads actionable unfair/deceptive/abusive conduct; puffery and mistake defenses not resolved at pleading stage; laches/cessation not grounds to dismiss now. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (establishes plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (clarifies plausibility and rejecting legal conclusions)
- Chae v. SLM Corp., 593 F.3d 936 (9th Cir.) (HEA §1098g preemption analysis distinguishing disclosure-based claims)
- Cipollone v. Liggett Group, Inc., 505 U.S. 504 (plurality opinion on preemption and the converse-disclosure principle)
- Walton v. Eaton Corp., 563 F.2d 66 (3d Cir.) (one-plaintiff-two-actions principle and consolidation/dismissal options)
- Farina v. Nokia Inc., 625 F.3d 97 (3d Cir.) (summary of express, field, and conflict preemption doctrine)
- Skidmore v. Swift & Co., 323 U.S. 134 (principles on deference to agency interpretations)
- United States v. Mead Corp., 533 U.S. 218 (standards for judicial deference to agency legal interpretations)
- CFPB v. Gordon, 819 F.3d 1179 (9th Cir.) (CFPA deception/definition framework)