A lawsuit accusing student-loan giant Navient NAVI, +0.06% of violating Pennsylvania and federal consumer-protection laws can move forward, in a decision that could bolster state efforts to regulate student-loan companies.
Student-loan companies and the Department of Education under Betsy DeVos have argued that the companies aren’t subject to state law, given the federal laws governing the student-loan program. The claim arises from a legal concept known as preemption, or the idea that federal law supersedes state law when they are in conflict.
States can pick up the slack of federal agencies Monday’s decision also tackles an issue that didn’t play a role in the earlier cases: whether a state can bring an action against a company while it’s being sued by the Consumer Financial Protection Bureau over similar issues. Navient, which was sued by the CFPB in 2017, had argued that the Consumer Protection Act doesn’t allow a state attorney general to bring a “copycat” claim.
The court decision comes after years of back-and-forth between states, the federal government and companies over states’ authority to regulate the firms. In 2015, states began passing laws to regulate student-loan servicers, which are contractors of the federal government.
Student loans have become modern serfdom.
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