Collector - November 2017 - 42

IAP

CFPB Pursues Two Student Loan Servicers
The bureau's actions contain guidance for all collection industry participants that collect consumer debt.
By Karen Scheibe Eliason

I

n recent months, the Consumer
Financial Protection Bureau has
taken action against two student
loan servicers who the bureau claims are
harming borrowers.
In January, the CFPB sued Navient, alleging
the nation's largest servicer of student loans
did not work in the best interests of its
customers. Among other things, the CFPB
accused the company of steering borrowers
toward repayment plans that require them to
pay more than necessary but lowered costs for
the company and not allocating borrower's
payments as directed.
Navient filed a motion to dismiss in March,
arguing that the lawsuit filed by the CFPB
against it improperly "invents new rules from
whole cloth and claims that Navient failed to
comply with them in the past."

In a 60-page decision issued in August,
the U.S. District Court for the Middle
District of Pennsylvania ruled that the
CFPB can move forward with its suit
against Navient, alleging the company
created obstacles for borrowers to repay
their debts in violation of the law.
U.S. District Judge Robert D. Mariani, a
2011 former-President Obama appointee,
denied Navient's motion to dismiss the
CFPB's case against it, saying the CFPB
had authority to sue without first engaging
in rulemaking to declare specific practices
unfair, deceptive or abusive.
The district court found that "the plain
language of the CFP [Consumer Financial
Protection] Act does not impose a requirement
on the Bureau to engage in rulemaking before
bringing an enforcement action."

In so ruling, the district court rejected
Navient's argument that the CFPB cannot
impose penalties on industry actors for
alleged UDAAP [Unfair, Deceptive, or
Abusive Acts or Practices] violations
by engaging in rulemaking through
enforcement, "or that Navient lacked fair
notice of what the CFP Act proscribes."
Mariani also refused to accept Navient's
argument that the CFPB's lawsuit against
it should be tossed out because the CFPB's
structure is unconstitutional, rendering the
suit unauthorized and void. Instead, the
district court concluded that the CFPB's
structure does not violate the Constitution,
saying that it is "convinced that ... the
Bureau's structure is not constitutionally
deficient."
In addition, the district court took issue
with Navient's argument that the law does
not impose an affirmative duty on it to
"provide individualized financial counseling
to borrowers" since it is a loan servicer
and not a fiduciary. But based on Navient's
previous public statements on its website
to the contrary, the district court held that
"Navient's active conduct created a duty to
act in accordance with their own statements."
Finally, the district court held that Navient
is still obligated to not commit unfair,
deceptive, or abusive acts in violation of
the CFP Act even though it is governed
and complies with comprehensive Higher
Education Act rules, Department of
Education regulations and contractual
obligations with the DOE.

CFPB ORDERS PRIVATE STUDENT
LOAN TRUST COMPANY AND DEBT
COLLECTOR TO PAY $21.6 MILLION
In September, federal consumer regulators
entered into a consent judgment with
National Collegiate Student Loan
Trusts ("Trusts"), a group of 15 trusts

42



Table of Contents for the Digital Edition of Collector - November 2017

Upfront
Industry News
Best Practices
FYI
Collection Tips
Making the Right Choice
Getting Your Ducks in a Row
Highlight Reel
Putting it all Together
Calendar
Honor Roll
On Call
Hire Purpose
CFPB Pursues Two Student Loan Servicers
Compliance
ACA SearchPoint
Last Word
Collector - November 2017 - Cover1
Collector - November 2017 - Cover2
Collector - November 2017 - 1
Collector - November 2017 - Upfront
Collector - November 2017 - 3
Collector - November 2017 - Industry News
Collector - November 2017 - 5
Collector - November 2017 - 6
Collector - November 2017 - 7
Collector - November 2017 - Best Practices
Collector - November 2017 - 9
Collector - November 2017 - FYI
Collector - November 2017 - 11
Collector - November 2017 - Collection Tips
Collector - November 2017 - 13
Collector - November 2017 - Making the Right Choice
Collector - November 2017 - 15
Collector - November 2017 - 16
Collector - November 2017 - 17
Collector - November 2017 - Getting Your Ducks in a Row
Collector - November 2017 - 19
Collector - November 2017 - 20
Collector - November 2017 - 21
Collector - November 2017 - 22
Collector - November 2017 - 23
Collector - November 2017 - 24
Collector - November 2017 - 25
Collector - November 2017 - Highlight Reel
Collector - November 2017 - 27
Collector - November 2017 - 28
Collector - November 2017 - 29
Collector - November 2017 - 30
Collector - November 2017 - 31
Collector - November 2017 - Putting it all Together
Collector - November 2017 - 33
Collector - November 2017 - 34
Collector - November 2017 - 35
Collector - November 2017 - Calendar
Collector - November 2017 - Honor Roll
Collector - November 2017 - On Call
Collector - November 2017 - 39
Collector - November 2017 - Hire Purpose
Collector - November 2017 - 41
Collector - November 2017 - CFPB Pursues Two Student Loan Servicers
Collector - November 2017 - 43
Collector - November 2017 - Compliance
Collector - November 2017 - 45
Collector - November 2017 - ACA SearchPoint
Collector - November 2017 - 47
Collector - November 2017 - Last Word
Collector - November 2017 - Cover3
Collector - November 2017 - Cover4
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