Hit from Both Sides: Third Circuit Allows CFPB and State AG to Run Concurrent Lawsuits Against Navient

Both the Consumer Financial Protection Bureau (CFPB) and Pennsylvania’s Attorney General (PA AG) filed lawsuits against Navient for its processes. Navient challenged the concurrent investigations, arguing that the Consumer Protection Act prohibited concurrent, parallel actions by the AG and the CFPB, and that the Higher Education Act preempts the state’s actions under state law. The Third Circuit—agreeing with the district court below it—ruled against Navient, finding that there was nothing wrong with these concurrent lawsuits. This article will focus on the concurrent suit claims only.

The underlying claims.

The claims of the underlying PA AG suit alleges that Navient engaged in unfair, deceptive and abusive practices (UDAAP) under the Consumer Protection Act by:

• Steering borrowers into forbearance rather than Income Driven Repayment plans (IDR);
• Failing to properly notify consumers of the negative consequences of submitting untimely or incomplete applications and breaking their enrollment in IDR;
• Placing borrowers into paid ahead status and sending a statement for $0, but then treating the lack of a payment on such zero-balance statement as a missed payment, thus resetting the clock for releasing loan cosigners; and
• Failing to correct an error that caused the misallocation or misapplication of submitted payments, resulting in improper law fees, interest charges, and negative credit reporting.

Nine months prior to the PA AG suit, the CFPB filed a suit against Navient for failing to adequately disclose availability of IDR plans.

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Third Circuit says the Consumer Protection Act does not prohibit concurrent suits.

Navient argued that the PA AG suit was attempting to do the same thing as the previously-filed CFPB suit, which is to require Navient to provide certain disclosures. In other words, Navient argued these were copycat claims filed by the same consumers for the same conduct. While Navient agrees that the Consumer Protection Act gives power to state AGs to enforce it, it only does so when the CFPB has not already enforced the act for the same conduct.

The Third Circuit disagreed, finding that nothing in the Consumer Protection Act prohibits concurrent suits. The court looked at the plain meaning of the specific statutory provision in question, finding that there was no language in the statute prohibiting concurrent claims by state AGs. The court contrasted this with other sections of the statute that did expressly prohibit concurrent claims. Based on statutory interpretation principles, the court found that the omission was intended by Congress, and thus concurrent claims are not prohibited.

The court also rejected Navient’s pre-suit notice argument. The Consumer Protection Act requires that states send a copy of their complaint to the CFPB prior to filing so that, if necessary, there can be coordination between the regulators. The Third Circuit disagreed with the argument that this means the state can only proceed with claims that the CFPB is not aware of.

The court concluded:

Accordingly, we hold that the clear statutory language of the Consumer Protection Act permits concurrent state claims, for nothing in the statutory framework suggests otherwise.

insideARM Perspective

While this is a civil—rather than a criminal—case, double jeopardy doesn’t technically apply...but that’s what I thought when I read this suit. When someone is harmed by the actions of another, our justice system allows for the harmed person to be “made whole” again through whatever recovery is appropriate. However, one of the court’s reasonings for allowing concurrent claims is that the PA AG may be able to recover more for their claim than the CFPB will in theirs. But then the question arises: if, hypothetically, the case goes to a judgment against Navient, will it then be liable for the difference between the two judgments, or will they be liable for both in full? The latter is probably the answer, since the Third Circuit mentioned in dicta that the PA AG’s claims were distinct from the claims brought by the CFPB—no matter how related they were. 

The biggest elephant in the room is whether this means that companies would face 10, 20, 30 concurrent suits for the same or similar allegations? Odds of this happening are relatively low, but apparently not impossible as Navient dealt with the above concurrent suit situation with the CFPB and three separate states (Pennsylvania, Washington, and Illinois).

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